' REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBL
COMMERCIALAND TAX DIVISION
CUSTOMS TAX APPEẠL NO E048 OF 2023
COMMISSIONER OF CUSTOMS & BORDER CONTROL..................................APPELLANT
-VERSUS-
SAI PHARMACEUTICALS LIMITED…………………………………….............RESPONDENT
(Being an Appeal from the Judgement of the Tax Appeals Tribunal at Nairobi delivered on the 6 th October, 2029 in the Nairobi TAT No. 731of 2022 BETWEEN SAI PHARMAECUTICALS LIMITED-VERSUS-
COMMISSIONER OF CUSTOMS &BORDERCONTROL)
JUDGEMENT
Background of the Appeal
The Appellant is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. Under Section 5 of the Act, the Kenya Revenue Authority is created as an agency of the Government for the collection and receipt of all tax revenue and mandated to administer and enforce all provisions of the written laws as set out in Parts 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.
The Respondent on the other hand is a limited liability company registered under the Companies Act, Cap 486 of the Laws of Kenya and engages in the business of pharmaceuticals and related products.
This is a second Appeal provoked by the judgment of the Tax Appeals Tribunal (TAT) at Nairobi, delivered on 6 th October 2023, in Nairobi TAT No. 731 of 2022. The dispute discloses a disagreement over the tariff classification of imported products, described as EVIT 200 and EVIT 400 CAPSULES. It was maintained by the respondent that at declaration stage, it classified the products as “medicaments” under HS Code 3004.50.00, in accordance with the Appellant’s own prior rulings of 22 nd July 2016 and 3 rd August 2016.
The Respondent, on or around 7 th May 2021, imported a consignment of EVIT 200 and EVIT 400 CAPSULES, import entry form C17C number 21NBOIM404216706, declaring them under the HS Code 3004.50.00 as previously established. However, contrary to its said rulings, the Appellant issued the letter referenced as CUS/V&T/TARI/RUL/331/2021) on 24 th June 202, declaring that HS Code 3004.50 for EVIT 200 capsule was at variance with the laboratory findings and as such, it reclassified the products under tariff HS Code 2106.90.91 categorizing it a “food supplement” as opposed medicament.
The Respondent was aggrieved and appealed the reclassification on 9 th July 2021. In support of their classification claim of EVIT 200 and EVIT 400 as medicaments and not food supplement, the respondent relied on array of evidence including the manufacturer’s drug license, Certificate of Pharmaceutical product, Food Safety and Standards Authority Guideline, Clinical trials, Approved Export forms of EVIT 200 and 400, prescriptions from physicians and the manufacturer’s literature.
The Appellant dismissed the appeal on 21 st October 2021 and upheld its reclassification decision of 24 th June 2021 solely basing its decision on amendments to the Explanatory Notes.
The Respondent was once again aggrieved and re-appealed by the letter of 8 th November 2021 challenging the commissioner’s decision on the grounds that the manufacturer’s export classification consistently categorized the products under pharmaceuticals (HS Code 30.04), that the composition of the product had not changed and thus requested for the Appellant’s laboratory test reports to enable comparison with the manufacturer’s data.
The laboratory reports were however, never provided to the Respondent but the Appellant, nevertheless, issued a demand for additional taxes in the sum of Kshs. 1,427,496, comprising Excise Duty, VAT and penalty based on the new tariff ruling. The Respondent objected to this demand on 22 nd March 2022 on grounds that the Appellant’s previous tariff rulings of 2016 had not been invalidated or withdrawn as required under Sections 67, 68, and 69 of the Tax Procedure Act, 2015 and further that it had not been furnished with laboratory test report.
On the 31 st of March 2022, the Respondent filed Miscellaneous Application No. 106 of 2022 at the Tax Appeals Tribunal (TAT) for an extension of time to appeal the Appellant’s ruling of 21 st October 2021 but which application was subsequently withdrawn on 22 nd April 2022 to facilitate a potential out-of-court settlement negotiations. However, no settlement was reached between the parties and on the 3 rd June 2022, the Appellant through letters KRA/CBC/BIA/TQH/ADV/388/2022 and KRA/CBC/BIA/TQH/ADV/389/2022, upheld its decision of 21 st October 2021 classifying EVIT 200 and 400 CAPSULES as food supplements. It termed the decision as an advance ruling under section 248A of the EACCMA 2004 with directions that it was only to be valid for a period of 12 months from the date of issue.
Accordingly, the Respondent appealed the Commission’s decision at the Tax Appeals Tribunal, Nairobi TAT No. 731 of 2022. The Tribunal delivered its judgment in on 6 th October 2023 setting aside the Commissioner’s review decision of 3 rd June 2022. The Tribunal held that EVIT 200 and EVIT 400 capsules are indeed medicaments classifiable under HS Code 3004.50.00. Aggrieved by the Tribunal’s decision, the Appellant lodged this present appeal against the whole of Tribunal’s decision of 6 th October 2023.
The Appeal
The memorandum of appeal dated 20 th December 2024 lists the grounds of the appeal to be :
The Tribunal erred in law and in fact in its findings at paragraph 79 by implying that the two products (EVIT 200 & EVIT 400) were similar to another product “neuroforte” that was subject of tariff classification dispute under TAT Case Number 732 of 2022 in which parties settled by way of consent.
The above finding by the Tribunal is a misrepresentation of facts since the composition, the active ingredients and the pharmacological indications of the two products are very different.
Whereas the two products EVIT 200 and EVIT 400 are indicated by the manufacturer in the product insert as antioxidant that provides specified wellness benefits, the other product “NEUROFORTE” considered by the Tribunal as similar to the two products are indicated as adjuvant for treatment of chronic rheumatoid and neuropathies associated with diabetes.
The Tribunal failed to appreciate that the ingredients of the products are different in terms of their nature and quantities: EVIT 200 - Vitamin E 20omg; EVIT 400- Vitamin E 400 mg: Neuroforte Vitamin B1 200mg, Vitamin B6 50mg and Vitamin B12 10000mcg.
The Tax Appeals Tribunal failed to appreciate that the two products are specified to be EVIT 200o and EVIT 400 antioxidants which confer health benefits to user and are not products put for prophylactic or therapeutic uses as per the terms of heading 30:04 state as follows: “Medicaments excluding goods of heading 30.02, 30.05 or 30.06).consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up I measured doses including those in form of transdermal administration systems) or in forms or packaging for retail sale.
Further the Tribunal failed to appreciate that terms of heading 30.04 covers only products which are intended for healing of a disease (therapeutic) and those that intended for treatment of a disease (prophylactic). In this regard, there are no disease (s) to which products are intended to cure or treat but when one takes the two products they confer health benefits as indicated by the manufacturer.
The Tribunal failed to infer to the definition of food supplements as provided for under the Harmonised system wherein the food supplements are considered to be products which one would ordinarily get from daily diets.
The Tribunal erred in its analysis for the- need-of a laboratory report. There was no need of laboratory analyses of the two products since the contention was not on whether the products contained vitamin E or on the quantities of the same but on whether the two products have been put up for therapeutic or prophylactic purposes as per the terms of heading: 30.04 or food supplements as defined under heading 21.06.
The Tribunal erred in Jaw and in fact in its interpretation of “food supplements” and to confirm which purpose for which the two products are put in use. The Tribunal''s decision contradicts the Harmonised System Convention and the General Interpretation Rules that governs classification of goods for trade purposes.
On those grounds, the appellant prays that the Honourable Court allows the Appeal and set aside the judgment of the Tax Appeals Tribunal. The Appellant’s further prays that it’s review decision issued on 3 rd June, 2022 classifying EVIT 200 and EVIT 400 imported by the Respondent under HS Code 2106.90.91 be upheld. The Appellant further claims costs of the Appeal.
Appellant’s Submissions
On whether the Tribunal erred in implying similarity between EVIT 200 & EVIT 400 and Neuroforte which was the subject of TAT Case Number 732 of 2022, it is the Appellant’s submission that such finding constitutes a misrepresentation of facts due to significant differences in composition, active ingredients, and pharmacological indications between the two product types.
It is presented that the EVIT products are presented as antioxidants for general wellness benefits, whereas Neuroforte is indicated as an adjuvant for chronic rheumatoid and neuropathies associated with diabetes. The Appellant further highlights the distinct ingredients and quantities; EVIT contains Vitamin E (200mg/400mg), while Neuroforte contains Vitamin B1 (200mg), B6 (50mg), and B12 (10000mcg). It is submitted that tariff classifications are determined on a case-by-case basis hence the Tribunal’s assumption of similarity was erroneous given the shown distinct compositions and indications.
On the classification of EVIT products, it is the Appellant’s case that the Tribunal failed to appreciate that EVIT products are not for prophylactic or therapeutic uses as per Heading 30.04. It is submitted that Heading 30.04 covers products specifically for healing or treating diseases, and that EVIT only confers general health benefits rather than specific cures or treatments.
The Appellant further submits that the Tribunal failed to refer to the Harmonised System’s definition of food supplements, which are considered products ordinarily obtained from daily diets. It is asserted that EVIT 200 and EVIT 400 are dietary supplementary preparations based on Vitamin E, used to prevent oxidation and manage deficiency, primarily for maintaining general health and well-being, not for treating ailments.
The Appellant maintains that the products do not contain an active substance with a curative or prophylactic effect against a particular ailment or disease. The Appellant relies on Explanatory Notes to HS Code 2106, item (16), which describe food supplements as preparations for general health or well-being. It is also claimed that the manufacturer’s packaging and data sheet clearly stated “food supplements”.
On Ground eight on the laboratory report, the Appellant argues that the Tribunal erred regarding the necessity of a laboratory report, asserting that it was unnecessary because the dispute centered on the purpose of the products (therapeutic/prophylactic vs. food supplement), not the presence or quantity of Vitamin E.
Finally, the Appellant submits that the classification by the Pharmacy and Poisons Board is for a different purpose than customs classification and should not bind the Commissioner seeking reliance in the case of Republic vs. KRA ex parte Beta Healthcare International Ltd to support this contention.
The Appellant thus prays that the Appeal be allowed, the judgment of the Tax Appeals Tribunal be set aside, the Appellant’s review decision of 3 rd June 2022 be upheld, and costs be borne by the Respondent.
Respondent’s Case
The Respondent opposed the appeal by the Statement of Facts dated 24.01.2024 in which it averred that during the period 2016 to 2021, on the strength of the Appellant’s ruling dated 22 nd July and 3 rd August for the EVIT 200 and EVIT 400 capsules respectively it imported the subject products and treated same as medicament because same were so registered by the pharmacy and poisons board.
On or around 7 th May 2021, through the Respondent’s clearing agent, Continental logistics Networks Limited, it imported EVIT 200 and EVIT 400 CAPSULES from GELTEC PRIVATE LIMITED vide entry form C17C entry number 21NBOIM404216706 under HS Code 3004.50,00, but in a complete turn of events the Appellant through his letter date 24 June 2021 referenced CUS/V&TTARIRUL/331/2021 found the declared HS Code 3004.50 for EVIT 200 capsule to be at variance with the laboratory findings and proceeded to classify the product in tariff HS Code 2106.90.91 of the East Africa Community Common External Tariff (EAC/CET).
The Respondent by its letter dated 9 th July 2021 appealed the Commissioner’s ruling of 24 th June 2021 and enclosed the manufacturer’s drug license, Certificate of Pharmaceutical product, Food Safety and Standards Authority Guideline, Clinical trials, Approved Export forms of EVIT 200 and 400 and prescriptions from physicians and the manufacturer''s literature as evidence that the EVIT 200 and EVIT 400 are medicaments.
The respondent accuses the Appellant in only relying on the amendments to the Explanatory Notes HS Committee 64 th Session, by the letter referenced KRA/C&BCIBIATHO/APPEAL/69/10/2021 of 21 st October 2021 to uphold its decision of 24 th June, 2021.
The Respondent appealed to the Appellant through its letter of 8 th November 2021 and argued that the manufacturer’s material composition export classification was under pharmaceuticals and that all process of documentation and permit approvals had been given before the exportation from the Manufacturer’s Authority which classified EVIT 200 and 400 CAPSULES under the HS Code heading 30.04. The Respondent requested the Appellant for laboratory test reports to enable the manufacturer to compare the analysis from the Appellant’s findings with the manufacturer’s data report but the report was never issued.
That on or around 15 th March 2022, the Appellant demanded from the Respondent, in respect of Excise Duty VAT and penalty, the payment of additional taxes in the sum of KSHS. 1, 427, 496 which Sum the Appellant stated in the said demand to be based on tariff ruling Reference CUS/V&T/GEN/MEM135/2021 dated 16 th June 2021 KRA/C&BC/BIATHO/APPEAL69/10/2021 dated 21 st October 2021 and also made against entry numbers 22NBOIM404216706 and 21NBOIM408847511.
In response to the Appellant’s demand the Respondent vide a letter dated 22 nd March, 2022 objected to the demand of KSHS. 1427496/= and argued that;
The tariff ruling CUS/V&TITARI RUL/372/2016 dated 3d August 2016 and tariff ruling CUSV&T/TARITARVRUL353/2016 dated 22 October July 2016 classifying EVIT 400 and EVIT 200 Capsule as medicament had not been invalidated or withdrawn as required under Section 67, 68 and 69 of the Tax Procedure Act, 2015.
That the Respondent had appealed the Appellant''s tariff ruling KRACRBCBIATHQJAPPEAL/69/10/2021 of 21 st October 2021 and requested the Respondent to provide the Laboratory test report from sample entry no. 21NBOIM404216706 which has not been released.
That the manufacturer''s report sent on 8 July 2021 to the Commissioner confirmed EVIT 200 and EVIT 400 were exported as medicine batches.
That the Appellant intended to file its appeal to the Tax Appeal Tribunal. Annexed hereto and marked “PKBS” are the demand letter dated 15 th March 2022 and Appellant''s letter SAI/O 1/2022 of 22 nd March 2022.
It is the Appellant’s case that it was wrong for the Appellant to demand additional tax and penalties in product EVIT 400 imported on 21 st September, 2021 vide import Entry Form C17C number 21NBOM408047511 in which the declared commodity tariff HS Code 30045000 had not been varied.
On 31 st March 2022 the Respondent filed Miscellaneous Application no. 106 of 2022 at Tax Appeals Tribunal for extension of time to enable the Respondent appeal against the Appellant’s ruling of 21 st October, 2021 which application was withdrawn on 22 nd April, 2022 to allow parties to engage in out of Court settlement.
The Respondent asserts that despite the Respondent holding meetings, no settlement was reached instead in his letters referenced KRA/CBCBIA/TQH/ADVI388/2022 and KRA/CBCBLA/TQH/ADV/389/2022 of 3 rd June 2022 the Appellant upheld his decision of 21 st October 2021 that classified EVIT 200 and 400 CAPSULES as food supplements. The Appellant termed the decision an advance ruling under section 248A of the EACCMA 2004 that would be valid for a period of 12 months from the date of issue.
Submissions by Respondent
The Respondent urges for the upholding of the Tax Appeals Tribunal’s decision and views the appeal as meritless and deserving dismissal . Addressing the grounds related to the judicial notice of the Neuroforte case under Grounds 1, 2, 3, 4 of the Memorandum of Appeal, the Respondent submits that the Tribunal did not err in its decision in that while the chemical compositions may differ, the context of the cases was similar, as both involved the Commissioner’s pattern of initially classifying products as medicaments based on laboratory analysis and subsequently reclassifying them as food supplements, leading to disputes.
The Respondent emphasize that the Tribunal correctly emphasized that not all products containing vitamins must necessarily be food supplements. It is presented that the Appellant wrongly applied amendments to the Explanatory Notes by the HS Committee’s 64 th Session, as the advisory notes from this session do not list products with active Vitamin E as an ingredient. The Commissioner is further accused of arbitrarily withdrawing earlier tariff rulings (from 2016) contrary to Sections 68 and 69 of the Tax Procedure Act, 2015, which stipulate the proper process for withdrawing private rulings.
It is the Respondent’s submissions that the Appellant disregarded the findings of the Pharmacy and Poisons Board, which is the expert authority in identifying drugs and ignored the Respondent’s valid licenses and certificates issued by the Board for the importation of these drugs. The Appellant''s “advance rulings” of 3 rd June 2022 are challenged as not meeting the requirements of Section 248A (1)(a) of the EACCMA (Amendment) Act, 2019 given they were issued after the imports were already subject to the 2016 rulings and not within the stipulated 30 days of request.
Regarding the reclassification of EVIT as a food supplement as under Grounds 5, 6, 7 & 9 of the Memorandum of Appeal, the Respondent maintains that the Tribunal’s finding was correct being classification of goods for customs duty is governed by the International Convention of Harmonized Commodity Description and Coding System, specifically Article 7 and Part 8 of the EAC Protocol, along with the World Customs Organization (WCO) Explanatory Notes.
It is submitted that the Tribunal correctly concluded that EVIT 200 and EVIT 400 capsules, with alpha-tocopherol as the active ingredient at their given dosages, prevent, relieve, and cure medical conditions as per the manufacturer''s information, thereby falling under HS Code 3004.50.00 (medicament). The Appellant presents that EVIT products align with HS Code 30.04, which covers medicaments for “therapeutic” (treatment of a condition) or “prophylactic” (formulated to prevent something) uses, put up in measured doses or retail packaging. Citing various forms of evidence relied upon by the Tribunal, it is submitted that the Tribunal established criteria for a medicament under HS Code 30.04 were fully satisfied.
On the duty to supply the laboratory report under Ground 8 of the Memorandum of Appeal, the Respondent contends that the Appellant was indeed obligated to provide the same. It is submitted that the Tribunal observed that the report was neither shared with the Respondent nor adduced as evidence despite the Appellant’s witness claiming confidentiality. The Respondent further submits that it is ordinary practice for the Commissioner to examine samples and produce a certificate of analysis.
It is submitted that the Appellant’s 2021 reclassification letters cited “laboratory findings” were unclear on samples examined and the Respondent’s repeated requests for the report were denied. It is presented that the Appellant failed to produce a certificate of analysis by a government analyst, government chemist, or designated laboratory as prima facie evidence, as required by Section 223(c) EACCMA, 2004. The Respondent prays for the appeal to be dismissed with costs, and for the Tribunal''s decision to be upheld.
ISSUES FOR DETERMINATION
Notably, the Appellant raised 9 grounds in its Memorandum of Appeal but during its submission condensed them to three main issue for determination being whether EVIT 200 and EVIT 400 are similar products to Neuroforte; the classification of EVIT 200 and EVIT 400; and whether the Appellant is bound by the decision of Pharmacy and Poisons Board.
The Respondent in response to the Appeal similarly raised three main issues for determination from the Appellant’s grounds in the Memorandum of Appeal into being whether the Appellant had a duty to supply the laboratory report analysis as evidence to the TAT; the classification of EVIT 200 and EVIT 400; and, whether the Tribunal erred by Taking judicial notice of TAT No. 732 of 2022 involving similar parties.
The Court having anxiously considered the grounds enumerated in the Memorandum of Appeal, the Respondent’s Statement of Facts, both parties’ submissions, the Tribunal’s decision vis a vis all the evidence presented, and in line with the issues submitted on by the parties, it identifies four main issues pertinent for its determination to be;
Whether the Tax Appeals Tribunal erred in law and/or in fact in finding that EVIT 200 and EVIT 400 CAPSULES are medicaments classifiable under HS Code 3004.50.00.
Whether the Appellant had a duty to supply the laboratory analysis report as evidence to the Tax Appeals Tribunal.
Whether the Tax Appeals Tribunal erred in its assessment of the similarity between EVIT 200/400 and Neuroforte and the relevance of TAT No. 732 of 2022.
Whether the Appellant is bound by the classification of the said products by the Pharmacy and Poisons Board.
Analysis And Determination
The Court, in exercising its appellate jurisdiction from the Tax Appeals Tribunal, operates within legal confines under Section 56(2) of the Tax Procedure Act which stipulates that an appeal to the High Court and Court of Appeal shall be on a question of law only.
The Court is cognizant of its mandate and obligation to give due deference to the findings of the fact by the Tax Appeal Tribunal and only depart from them if they were perverse as was reiterated in Mercy Kirito Mutegi vs Beatrice Nkatha Nyaga & 2 Others (2013) eKLR where the Court of Appeal held as follows:
“What are the points of law raised in this appeal? An appellant Court will not ordinarily differ with the findings on a question of fact, by the trial Judge who had the advantage of hearing and seeing the witnesses. Our role is to review the evidence and determine whether the conclusions reached are in accordance with the evidence and the law. A conclusion although based on primary factual evidence that is erroneous becomes a point of law.”
Flowing from the foregoing, the court proceeds to determine whether there are demonstrated errors by the Tribunal on points of law that may justify the interference by it. Whether the Tax Appeals Tribunal erred law in its assessment of the similarity between EVIT 200/400 and Neuroforte, and the relevance of TAT No. 732 of 2022 .
The Appellant contends that the Tribunal erred by implying a similarity between EVIT 200/400 and Neuroforte, arguing that their composition, active ingredients, and pharmacological indications are very different. The Appellant highlights the distinct nature of EVIT (Vitamin E 200mg/400mg, an antioxidant for wellness benefits) versus Neuroforte (Vitamin B complex, an adjuvant for chronic rheumatoid and neuropathies associated with diabetes). The Appellant’s position is that tariff classification should be determined on a case-by-case basis, strictly on the product''s specific characteristics. On the other hand, the Respondent acknowledges the factual differences in the products’ chemical composition and active ingredients, then argues that the Tribunal was right by taking judicial notice of TAT No. 732 of 2022. The Respondent’s position is that the context of the cases was similar, specifically pointing to the pattern of the Commissioner’s actions.
The Court upholds the Tribunal’s decision to apply judicial notice in this context for being appropriate. While the chemical compositions and specific medical indications of EVIT products and Neuroforte tablets are indeed distinct, the Tribunal’s decision to take judicial notice was not based on a factual equivalence of the products themselves. Instead, it was based on the procedural and contextual similarity of the disputes.
The Tribunal correctly identified a recurring pattern in the Appellant’s administrative conduct concerning the reclassification of pharmaceutical or health-related products. This pattern includes the Appellant’s initial classification of products as medicaments, followed by a subsequent reclassification to food supplements without transparent or adequately substantiated reasons and a failure to adhere to established procedures for withdrawing prior rulings or providing requested evidence being the laboratory report. Further, the Tribunal’s emphasis that not all products containing vitamins must be food supplements is a correct statement in line with the Harmonized System which provides specific headings for medicaments containing vitamins (HS 3004.50.00) alongside headings for food supplements (HS 2106.90.91).
The rationale and purpose of judicial notice is to recognize certain facts or patterns that are commonly known or easily verifiable thereby streamlining proceedings. In this instance, the Tribunal’s recognition of a similar modus operandi by the Appellant in a related case involving the same parties serves to underscore a need for administrative consistency and fairness. The implication then is that the Appellant’s actions in the present case would be viewed through the lens of its past conduct in similar classification disputes. That is desirable for purposes of consistency so that tax payers are aware of what to expect on custom when importing products. The court has not been persuaded that there was an error tainting the decision of the tribunal in its determination and thus answers the issue in the negative. Whether the Tax Appeals Tribunal erred in law in finding that EVIT 200 and EVIT 400 CAPSULES are medicaments classifiable under HS Code 3004.50.00.
It is beyond debate that classification of goods for customs duty in Kenya is governed by the International Convention on the Harmonized Commodity Description and Coding System (HS Convention), as domesticated as Part 8 of the Protocol on the establishment of the East African Customs Union. Article 7 as read with Part 8 provides for interpretation aids including the World Customs Organization (WCO) Explanatory Notes.
The General Interpretation Rules (GIRs) specifically GIR 1 and GIR 6 are also important in this process as they guide on how headings, subheadings and notes are to be applied. The General Interpretation Rules 1 (GIRI) for the classification of goods provide that the classification of goods shall be governed by the following principles;
“The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and provided such headings or notes do not otherwise required according to the following provisions…”
The General Interpretation Rule 6 further provides;
“For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheadings. Notes and mutatis mutandis to the above rules on the understanding that only subheadings at the same level are comparable. For the purposes of this rule the relative section and chapter notes also apply unless the context otherwise.”
Because the Appeal revolves around the distinction between “medicament” (HS Code 30.04) and “food supplement” (HS Code 21.06), the Court duty is to discern, on a balance of probabilities, if the decision of the Tribunal is in tandem with the classification codes or if there is a wholly unsupportable departure from the dictates of that law. That however call for evaluation of the facts presented to see if the decision flies on the face of the facts as far as the description of the products was availed to the tribunal. With that approach, the answer must be in the question whether the products were shown to be “medicaments” consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses or in forms of packaging for retail sale, so as to fall under HS Code 30.04, or “food preparations” not elsewhere specified or included, including “Food Supplements fall under HS Code 21.06.
The court in applying the above definitions to EVIT 200 and EVIT 400 products notes several facts in strong support their classification as medicaments. The following are some of the facts drawn from the record availed
The EVIT products were registered as medicaments by the Pharmacy and Poisons Board in 2008 under certificates H2005/337 and H2005/338. The Respondent is licensed by this Board to distribute these products as med
[...truncated]
IN THE HIGH COURT OF KENYA AT NAIROBL
COMMERCIALAND TAX DIVISION
CUSTOMS TAX APPEẠL NO E048 OF 2023
COMMISSIONER OF CUSTOMS & BORDER CONTROL..................................APPELLANT
-VERSUS-
SAI PHARMACEUTICALS LIMITED…………………………………….............RESPONDENT
(Being an Appeal from the Judgement of the Tax Appeals Tribunal at Nairobi delivered on the 6 th October, 2029 in the Nairobi TAT No. 731of 2022 BETWEEN SAI PHARMAECUTICALS LIMITED-VERSUS-
COMMISSIONER OF CUSTOMS &BORDERCONTROL)
JUDGEMENT
Background of the Appeal
The Appellant is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. Under Section 5 of the Act, the Kenya Revenue Authority is created as an agency of the Government for the collection and receipt of all tax revenue and mandated to administer and enforce all provisions of the written laws as set out in Parts 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.
The Respondent on the other hand is a limited liability company registered under the Companies Act, Cap 486 of the Laws of Kenya and engages in the business of pharmaceuticals and related products.
This is a second Appeal provoked by the judgment of the Tax Appeals Tribunal (TAT) at Nairobi, delivered on 6 th October 2023, in Nairobi TAT No. 731 of 2022. The dispute discloses a disagreement over the tariff classification of imported products, described as EVIT 200 and EVIT 400 CAPSULES. It was maintained by the respondent that at declaration stage, it classified the products as “medicaments” under HS Code 3004.50.00, in accordance with the Appellant’s own prior rulings of 22 nd July 2016 and 3 rd August 2016.
The Respondent, on or around 7 th May 2021, imported a consignment of EVIT 200 and EVIT 400 CAPSULES, import entry form C17C number 21NBOIM404216706, declaring them under the HS Code 3004.50.00 as previously established. However, contrary to its said rulings, the Appellant issued the letter referenced as CUS/V&T/TARI/RUL/331/2021) on 24 th June 202, declaring that HS Code 3004.50 for EVIT 200 capsule was at variance with the laboratory findings and as such, it reclassified the products under tariff HS Code 2106.90.91 categorizing it a “food supplement” as opposed medicament.
The Respondent was aggrieved and appealed the reclassification on 9 th July 2021. In support of their classification claim of EVIT 200 and EVIT 400 as medicaments and not food supplement, the respondent relied on array of evidence including the manufacturer’s drug license, Certificate of Pharmaceutical product, Food Safety and Standards Authority Guideline, Clinical trials, Approved Export forms of EVIT 200 and 400, prescriptions from physicians and the manufacturer’s literature.
The Appellant dismissed the appeal on 21 st October 2021 and upheld its reclassification decision of 24 th June 2021 solely basing its decision on amendments to the Explanatory Notes.
The Respondent was once again aggrieved and re-appealed by the letter of 8 th November 2021 challenging the commissioner’s decision on the grounds that the manufacturer’s export classification consistently categorized the products under pharmaceuticals (HS Code 30.04), that the composition of the product had not changed and thus requested for the Appellant’s laboratory test reports to enable comparison with the manufacturer’s data.
The laboratory reports were however, never provided to the Respondent but the Appellant, nevertheless, issued a demand for additional taxes in the sum of Kshs. 1,427,496, comprising Excise Duty, VAT and penalty based on the new tariff ruling. The Respondent objected to this demand on 22 nd March 2022 on grounds that the Appellant’s previous tariff rulings of 2016 had not been invalidated or withdrawn as required under Sections 67, 68, and 69 of the Tax Procedure Act, 2015 and further that it had not been furnished with laboratory test report.
On the 31 st of March 2022, the Respondent filed Miscellaneous Application No. 106 of 2022 at the Tax Appeals Tribunal (TAT) for an extension of time to appeal the Appellant’s ruling of 21 st October 2021 but which application was subsequently withdrawn on 22 nd April 2022 to facilitate a potential out-of-court settlement negotiations. However, no settlement was reached between the parties and on the 3 rd June 2022, the Appellant through letters KRA/CBC/BIA/TQH/ADV/388/2022 and KRA/CBC/BIA/TQH/ADV/389/2022, upheld its decision of 21 st October 2021 classifying EVIT 200 and 400 CAPSULES as food supplements. It termed the decision as an advance ruling under section 248A of the EACCMA 2004 with directions that it was only to be valid for a period of 12 months from the date of issue.
Accordingly, the Respondent appealed the Commission’s decision at the Tax Appeals Tribunal, Nairobi TAT No. 731 of 2022. The Tribunal delivered its judgment in on 6 th October 2023 setting aside the Commissioner’s review decision of 3 rd June 2022. The Tribunal held that EVIT 200 and EVIT 400 capsules are indeed medicaments classifiable under HS Code 3004.50.00. Aggrieved by the Tribunal’s decision, the Appellant lodged this present appeal against the whole of Tribunal’s decision of 6 th October 2023.
The Appeal
The memorandum of appeal dated 20 th December 2024 lists the grounds of the appeal to be :
The Tribunal erred in law and in fact in its findings at paragraph 79 by implying that the two products (EVIT 200 & EVIT 400) were similar to another product “neuroforte” that was subject of tariff classification dispute under TAT Case Number 732 of 2022 in which parties settled by way of consent.
The above finding by the Tribunal is a misrepresentation of facts since the composition, the active ingredients and the pharmacological indications of the two products are very different.
Whereas the two products EVIT 200 and EVIT 400 are indicated by the manufacturer in the product insert as antioxidant that provides specified wellness benefits, the other product “NEUROFORTE” considered by the Tribunal as similar to the two products are indicated as adjuvant for treatment of chronic rheumatoid and neuropathies associated with diabetes.
The Tribunal failed to appreciate that the ingredients of the products are different in terms of their nature and quantities: EVIT 200 - Vitamin E 20omg; EVIT 400- Vitamin E 400 mg: Neuroforte Vitamin B1 200mg, Vitamin B6 50mg and Vitamin B12 10000mcg.
The Tax Appeals Tribunal failed to appreciate that the two products are specified to be EVIT 200o and EVIT 400 antioxidants which confer health benefits to user and are not products put for prophylactic or therapeutic uses as per the terms of heading 30:04 state as follows: “Medicaments excluding goods of heading 30.02, 30.05 or 30.06).consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up I measured doses including those in form of transdermal administration systems) or in forms or packaging for retail sale.
Further the Tribunal failed to appreciate that terms of heading 30.04 covers only products which are intended for healing of a disease (therapeutic) and those that intended for treatment of a disease (prophylactic). In this regard, there are no disease (s) to which products are intended to cure or treat but when one takes the two products they confer health benefits as indicated by the manufacturer.
The Tribunal failed to infer to the definition of food supplements as provided for under the Harmonised system wherein the food supplements are considered to be products which one would ordinarily get from daily diets.
The Tribunal erred in its analysis for the- need-of a laboratory report. There was no need of laboratory analyses of the two products since the contention was not on whether the products contained vitamin E or on the quantities of the same but on whether the two products have been put up for therapeutic or prophylactic purposes as per the terms of heading: 30.04 or food supplements as defined under heading 21.06.
The Tribunal erred in Jaw and in fact in its interpretation of “food supplements” and to confirm which purpose for which the two products are put in use. The Tribunal''s decision contradicts the Harmonised System Convention and the General Interpretation Rules that governs classification of goods for trade purposes.
On those grounds, the appellant prays that the Honourable Court allows the Appeal and set aside the judgment of the Tax Appeals Tribunal. The Appellant’s further prays that it’s review decision issued on 3 rd June, 2022 classifying EVIT 200 and EVIT 400 imported by the Respondent under HS Code 2106.90.91 be upheld. The Appellant further claims costs of the Appeal.
Appellant’s Submissions
On whether the Tribunal erred in implying similarity between EVIT 200 & EVIT 400 and Neuroforte which was the subject of TAT Case Number 732 of 2022, it is the Appellant’s submission that such finding constitutes a misrepresentation of facts due to significant differences in composition, active ingredients, and pharmacological indications between the two product types.
It is presented that the EVIT products are presented as antioxidants for general wellness benefits, whereas Neuroforte is indicated as an adjuvant for chronic rheumatoid and neuropathies associated with diabetes. The Appellant further highlights the distinct ingredients and quantities; EVIT contains Vitamin E (200mg/400mg), while Neuroforte contains Vitamin B1 (200mg), B6 (50mg), and B12 (10000mcg). It is submitted that tariff classifications are determined on a case-by-case basis hence the Tribunal’s assumption of similarity was erroneous given the shown distinct compositions and indications.
On the classification of EVIT products, it is the Appellant’s case that the Tribunal failed to appreciate that EVIT products are not for prophylactic or therapeutic uses as per Heading 30.04. It is submitted that Heading 30.04 covers products specifically for healing or treating diseases, and that EVIT only confers general health benefits rather than specific cures or treatments.
The Appellant further submits that the Tribunal failed to refer to the Harmonised System’s definition of food supplements, which are considered products ordinarily obtained from daily diets. It is asserted that EVIT 200 and EVIT 400 are dietary supplementary preparations based on Vitamin E, used to prevent oxidation and manage deficiency, primarily for maintaining general health and well-being, not for treating ailments.
The Appellant maintains that the products do not contain an active substance with a curative or prophylactic effect against a particular ailment or disease. The Appellant relies on Explanatory Notes to HS Code 2106, item (16), which describe food supplements as preparations for general health or well-being. It is also claimed that the manufacturer’s packaging and data sheet clearly stated “food supplements”.
On Ground eight on the laboratory report, the Appellant argues that the Tribunal erred regarding the necessity of a laboratory report, asserting that it was unnecessary because the dispute centered on the purpose of the products (therapeutic/prophylactic vs. food supplement), not the presence or quantity of Vitamin E.
Finally, the Appellant submits that the classification by the Pharmacy and Poisons Board is for a different purpose than customs classification and should not bind the Commissioner seeking reliance in the case of Republic vs. KRA ex parte Beta Healthcare International Ltd to support this contention.
The Appellant thus prays that the Appeal be allowed, the judgment of the Tax Appeals Tribunal be set aside, the Appellant’s review decision of 3 rd June 2022 be upheld, and costs be borne by the Respondent.
Respondent’s Case
The Respondent opposed the appeal by the Statement of Facts dated 24.01.2024 in which it averred that during the period 2016 to 2021, on the strength of the Appellant’s ruling dated 22 nd July and 3 rd August for the EVIT 200 and EVIT 400 capsules respectively it imported the subject products and treated same as medicament because same were so registered by the pharmacy and poisons board.
On or around 7 th May 2021, through the Respondent’s clearing agent, Continental logistics Networks Limited, it imported EVIT 200 and EVIT 400 CAPSULES from GELTEC PRIVATE LIMITED vide entry form C17C entry number 21NBOIM404216706 under HS Code 3004.50,00, but in a complete turn of events the Appellant through his letter date 24 June 2021 referenced CUS/V&TTARIRUL/331/2021 found the declared HS Code 3004.50 for EVIT 200 capsule to be at variance with the laboratory findings and proceeded to classify the product in tariff HS Code 2106.90.91 of the East Africa Community Common External Tariff (EAC/CET).
The Respondent by its letter dated 9 th July 2021 appealed the Commissioner’s ruling of 24 th June 2021 and enclosed the manufacturer’s drug license, Certificate of Pharmaceutical product, Food Safety and Standards Authority Guideline, Clinical trials, Approved Export forms of EVIT 200 and 400 and prescriptions from physicians and the manufacturer''s literature as evidence that the EVIT 200 and EVIT 400 are medicaments.
The respondent accuses the Appellant in only relying on the amendments to the Explanatory Notes HS Committee 64 th Session, by the letter referenced KRA/C&BCIBIATHO/APPEAL/69/10/2021 of 21 st October 2021 to uphold its decision of 24 th June, 2021.
The Respondent appealed to the Appellant through its letter of 8 th November 2021 and argued that the manufacturer’s material composition export classification was under pharmaceuticals and that all process of documentation and permit approvals had been given before the exportation from the Manufacturer’s Authority which classified EVIT 200 and 400 CAPSULES under the HS Code heading 30.04. The Respondent requested the Appellant for laboratory test reports to enable the manufacturer to compare the analysis from the Appellant’s findings with the manufacturer’s data report but the report was never issued.
That on or around 15 th March 2022, the Appellant demanded from the Respondent, in respect of Excise Duty VAT and penalty, the payment of additional taxes in the sum of KSHS. 1, 427, 496 which Sum the Appellant stated in the said demand to be based on tariff ruling Reference CUS/V&T/GEN/MEM135/2021 dated 16 th June 2021 KRA/C&BC/BIATHO/APPEAL69/10/2021 dated 21 st October 2021 and also made against entry numbers 22NBOIM404216706 and 21NBOIM408847511.
In response to the Appellant’s demand the Respondent vide a letter dated 22 nd March, 2022 objected to the demand of KSHS. 1427496/= and argued that;
The tariff ruling CUS/V&TITARI RUL/372/2016 dated 3d August 2016 and tariff ruling CUSV&T/TARITARVRUL353/2016 dated 22 October July 2016 classifying EVIT 400 and EVIT 200 Capsule as medicament had not been invalidated or withdrawn as required under Section 67, 68 and 69 of the Tax Procedure Act, 2015.
That the Respondent had appealed the Appellant''s tariff ruling KRACRBCBIATHQJAPPEAL/69/10/2021 of 21 st October 2021 and requested the Respondent to provide the Laboratory test report from sample entry no. 21NBOIM404216706 which has not been released.
That the manufacturer''s report sent on 8 July 2021 to the Commissioner confirmed EVIT 200 and EVIT 400 were exported as medicine batches.
That the Appellant intended to file its appeal to the Tax Appeal Tribunal. Annexed hereto and marked “PKBS” are the demand letter dated 15 th March 2022 and Appellant''s letter SAI/O 1/2022 of 22 nd March 2022.
It is the Appellant’s case that it was wrong for the Appellant to demand additional tax and penalties in product EVIT 400 imported on 21 st September, 2021 vide import Entry Form C17C number 21NBOM408047511 in which the declared commodity tariff HS Code 30045000 had not been varied.
On 31 st March 2022 the Respondent filed Miscellaneous Application no. 106 of 2022 at Tax Appeals Tribunal for extension of time to enable the Respondent appeal against the Appellant’s ruling of 21 st October, 2021 which application was withdrawn on 22 nd April, 2022 to allow parties to engage in out of Court settlement.
The Respondent asserts that despite the Respondent holding meetings, no settlement was reached instead in his letters referenced KRA/CBCBIA/TQH/ADVI388/2022 and KRA/CBCBLA/TQH/ADV/389/2022 of 3 rd June 2022 the Appellant upheld his decision of 21 st October 2021 that classified EVIT 200 and 400 CAPSULES as food supplements. The Appellant termed the decision an advance ruling under section 248A of the EACCMA 2004 that would be valid for a period of 12 months from the date of issue.
Submissions by Respondent
The Respondent urges for the upholding of the Tax Appeals Tribunal’s decision and views the appeal as meritless and deserving dismissal . Addressing the grounds related to the judicial notice of the Neuroforte case under Grounds 1, 2, 3, 4 of the Memorandum of Appeal, the Respondent submits that the Tribunal did not err in its decision in that while the chemical compositions may differ, the context of the cases was similar, as both involved the Commissioner’s pattern of initially classifying products as medicaments based on laboratory analysis and subsequently reclassifying them as food supplements, leading to disputes.
The Respondent emphasize that the Tribunal correctly emphasized that not all products containing vitamins must necessarily be food supplements. It is presented that the Appellant wrongly applied amendments to the Explanatory Notes by the HS Committee’s 64 th Session, as the advisory notes from this session do not list products with active Vitamin E as an ingredient. The Commissioner is further accused of arbitrarily withdrawing earlier tariff rulings (from 2016) contrary to Sections 68 and 69 of the Tax Procedure Act, 2015, which stipulate the proper process for withdrawing private rulings.
It is the Respondent’s submissions that the Appellant disregarded the findings of the Pharmacy and Poisons Board, which is the expert authority in identifying drugs and ignored the Respondent’s valid licenses and certificates issued by the Board for the importation of these drugs. The Appellant''s “advance rulings” of 3 rd June 2022 are challenged as not meeting the requirements of Section 248A (1)(a) of the EACCMA (Amendment) Act, 2019 given they were issued after the imports were already subject to the 2016 rulings and not within the stipulated 30 days of request.
Regarding the reclassification of EVIT as a food supplement as under Grounds 5, 6, 7 & 9 of the Memorandum of Appeal, the Respondent maintains that the Tribunal’s finding was correct being classification of goods for customs duty is governed by the International Convention of Harmonized Commodity Description and Coding System, specifically Article 7 and Part 8 of the EAC Protocol, along with the World Customs Organization (WCO) Explanatory Notes.
It is submitted that the Tribunal correctly concluded that EVIT 200 and EVIT 400 capsules, with alpha-tocopherol as the active ingredient at their given dosages, prevent, relieve, and cure medical conditions as per the manufacturer''s information, thereby falling under HS Code 3004.50.00 (medicament). The Appellant presents that EVIT products align with HS Code 30.04, which covers medicaments for “therapeutic” (treatment of a condition) or “prophylactic” (formulated to prevent something) uses, put up in measured doses or retail packaging. Citing various forms of evidence relied upon by the Tribunal, it is submitted that the Tribunal established criteria for a medicament under HS Code 30.04 were fully satisfied.
On the duty to supply the laboratory report under Ground 8 of the Memorandum of Appeal, the Respondent contends that the Appellant was indeed obligated to provide the same. It is submitted that the Tribunal observed that the report was neither shared with the Respondent nor adduced as evidence despite the Appellant’s witness claiming confidentiality. The Respondent further submits that it is ordinary practice for the Commissioner to examine samples and produce a certificate of analysis.
It is submitted that the Appellant’s 2021 reclassification letters cited “laboratory findings” were unclear on samples examined and the Respondent’s repeated requests for the report were denied. It is presented that the Appellant failed to produce a certificate of analysis by a government analyst, government chemist, or designated laboratory as prima facie evidence, as required by Section 223(c) EACCMA, 2004. The Respondent prays for the appeal to be dismissed with costs, and for the Tribunal''s decision to be upheld.
ISSUES FOR DETERMINATION
Notably, the Appellant raised 9 grounds in its Memorandum of Appeal but during its submission condensed them to three main issue for determination being whether EVIT 200 and EVIT 400 are similar products to Neuroforte; the classification of EVIT 200 and EVIT 400; and whether the Appellant is bound by the decision of Pharmacy and Poisons Board.
The Respondent in response to the Appeal similarly raised three main issues for determination from the Appellant’s grounds in the Memorandum of Appeal into being whether the Appellant had a duty to supply the laboratory report analysis as evidence to the TAT; the classification of EVIT 200 and EVIT 400; and, whether the Tribunal erred by Taking judicial notice of TAT No. 732 of 2022 involving similar parties.
The Court having anxiously considered the grounds enumerated in the Memorandum of Appeal, the Respondent’s Statement of Facts, both parties’ submissions, the Tribunal’s decision vis a vis all the evidence presented, and in line with the issues submitted on by the parties, it identifies four main issues pertinent for its determination to be;
Whether the Tax Appeals Tribunal erred in law and/or in fact in finding that EVIT 200 and EVIT 400 CAPSULES are medicaments classifiable under HS Code 3004.50.00.
Whether the Appellant had a duty to supply the laboratory analysis report as evidence to the Tax Appeals Tribunal.
Whether the Tax Appeals Tribunal erred in its assessment of the similarity between EVIT 200/400 and Neuroforte and the relevance of TAT No. 732 of 2022.
Whether the Appellant is bound by the classification of the said products by the Pharmacy and Poisons Board.
Analysis And Determination
The Court, in exercising its appellate jurisdiction from the Tax Appeals Tribunal, operates within legal confines under Section 56(2) of the Tax Procedure Act which stipulates that an appeal to the High Court and Court of Appeal shall be on a question of law only.
The Court is cognizant of its mandate and obligation to give due deference to the findings of the fact by the Tax Appeal Tribunal and only depart from them if they were perverse as was reiterated in Mercy Kirito Mutegi vs Beatrice Nkatha Nyaga & 2 Others (2013) eKLR where the Court of Appeal held as follows:
“What are the points of law raised in this appeal? An appellant Court will not ordinarily differ with the findings on a question of fact, by the trial Judge who had the advantage of hearing and seeing the witnesses. Our role is to review the evidence and determine whether the conclusions reached are in accordance with the evidence and the law. A conclusion although based on primary factual evidence that is erroneous becomes a point of law.”
Flowing from the foregoing, the court proceeds to determine whether there are demonstrated errors by the Tribunal on points of law that may justify the interference by it. Whether the Tax Appeals Tribunal erred law in its assessment of the similarity between EVIT 200/400 and Neuroforte, and the relevance of TAT No. 732 of 2022 .
The Appellant contends that the Tribunal erred by implying a similarity between EVIT 200/400 and Neuroforte, arguing that their composition, active ingredients, and pharmacological indications are very different. The Appellant highlights the distinct nature of EVIT (Vitamin E 200mg/400mg, an antioxidant for wellness benefits) versus Neuroforte (Vitamin B complex, an adjuvant for chronic rheumatoid and neuropathies associated with diabetes). The Appellant’s position is that tariff classification should be determined on a case-by-case basis, strictly on the product''s specific characteristics. On the other hand, the Respondent acknowledges the factual differences in the products’ chemical composition and active ingredients, then argues that the Tribunal was right by taking judicial notice of TAT No. 732 of 2022. The Respondent’s position is that the context of the cases was similar, specifically pointing to the pattern of the Commissioner’s actions.
The Court upholds the Tribunal’s decision to apply judicial notice in this context for being appropriate. While the chemical compositions and specific medical indications of EVIT products and Neuroforte tablets are indeed distinct, the Tribunal’s decision to take judicial notice was not based on a factual equivalence of the products themselves. Instead, it was based on the procedural and contextual similarity of the disputes.
The Tribunal correctly identified a recurring pattern in the Appellant’s administrative conduct concerning the reclassification of pharmaceutical or health-related products. This pattern includes the Appellant’s initial classification of products as medicaments, followed by a subsequent reclassification to food supplements without transparent or adequately substantiated reasons and a failure to adhere to established procedures for withdrawing prior rulings or providing requested evidence being the laboratory report. Further, the Tribunal’s emphasis that not all products containing vitamins must be food supplements is a correct statement in line with the Harmonized System which provides specific headings for medicaments containing vitamins (HS 3004.50.00) alongside headings for food supplements (HS 2106.90.91).
The rationale and purpose of judicial notice is to recognize certain facts or patterns that are commonly known or easily verifiable thereby streamlining proceedings. In this instance, the Tribunal’s recognition of a similar modus operandi by the Appellant in a related case involving the same parties serves to underscore a need for administrative consistency and fairness. The implication then is that the Appellant’s actions in the present case would be viewed through the lens of its past conduct in similar classification disputes. That is desirable for purposes of consistency so that tax payers are aware of what to expect on custom when importing products. The court has not been persuaded that there was an error tainting the decision of the tribunal in its determination and thus answers the issue in the negative. Whether the Tax Appeals Tribunal erred in law in finding that EVIT 200 and EVIT 400 CAPSULES are medicaments classifiable under HS Code 3004.50.00.
It is beyond debate that classification of goods for customs duty in Kenya is governed by the International Convention on the Harmonized Commodity Description and Coding System (HS Convention), as domesticated as Part 8 of the Protocol on the establishment of the East African Customs Union. Article 7 as read with Part 8 provides for interpretation aids including the World Customs Organization (WCO) Explanatory Notes.
The General Interpretation Rules (GIRs) specifically GIR 1 and GIR 6 are also important in this process as they guide on how headings, subheadings and notes are to be applied. The General Interpretation Rules 1 (GIRI) for the classification of goods provide that the classification of goods shall be governed by the following principles;
“The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and provided such headings or notes do not otherwise required according to the following provisions…”
The General Interpretation Rule 6 further provides;
“For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheadings. Notes and mutatis mutandis to the above rules on the understanding that only subheadings at the same level are comparable. For the purposes of this rule the relative section and chapter notes also apply unless the context otherwise.”
Because the Appeal revolves around the distinction between “medicament” (HS Code 30.04) and “food supplement” (HS Code 21.06), the Court duty is to discern, on a balance of probabilities, if the decision of the Tribunal is in tandem with the classification codes or if there is a wholly unsupportable departure from the dictates of that law. That however call for evaluation of the facts presented to see if the decision flies on the face of the facts as far as the description of the products was availed to the tribunal. With that approach, the answer must be in the question whether the products were shown to be “medicaments” consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses or in forms of packaging for retail sale, so as to fall under HS Code 30.04, or “food preparations” not elsewhere specified or included, including “Food Supplements fall under HS Code 21.06.
The court in applying the above definitions to EVIT 200 and EVIT 400 products notes several facts in strong support their classification as medicaments. The following are some of the facts drawn from the record availed
The EVIT products were registered as medicaments by the Pharmacy and Poisons Board in 2008 under certificates H2005/337 and H2005/338. The Respondent is licensed by this Board to distribute these products as med
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