' REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI COMMERCIAL & TAX DIVISION
ITA NO. E307 OF 2024
COMMISSIONER OF DOMESTIC TAXES.........................................................APPELLANT
VERSUS
DUTCH FLOWER GROUP KENYA LIMITED..................................................RESPONDENT (Being an appeal arising from the Judgment of the Tax Appeals Tribunal delivered on 11 th October 2024 in Tax Appeals Tribunal Number E089 of 2023)
JUDGMENT
Background
The Appellant herein is the Principal Officer appointed pursuant to Section 13 of the Kenya Revenue Authority Act (Cap 469). The Appellant is mandated to administer and enforce the provisions of tax statutes for the purposes of assessing, collecting, and accounting for all public revenue.
The Respondent is a limited liability company incorporated in Kenya. It is primarily involved in the provision of logistical support services to clients domiciled outside Kenya, specifically Flower Retail Europe BV (hereinafter referred to as “FRE”) and Flower Connect Holding (hereinafter referred to as “FCH”) both based in the Netherlands.
The dispute originated from the Respondent’s claim for a VAT refund relating to excess input tax accumulated from making zero-rated supplies. The Respondent asserted that the services provided under its Service Agreements with FRE and FCH constituted exported services, which were zero-rated under the provisions of the VAT Act. As a result of providing these purportedly zero-rated services, the Respondent accumulated excess VAT credits (input tax exceeding output tax).
On July 12, 2016, the Respondent lodged an application with the Appellant for a VAT refund totalling KES 2,603,527.00, covering the tax period of January 2016 to May 2016. The claim was rejected by the appellant.
The issues around the rejection of the refund claim by the Respondent emerged to be; whether the Respondent acted as an agent of its overseas clientele making the input costs non-deductible to the agent; and, whether the services were truly exported. Those issues had been the subject of prior litigation concerning overlapping tax periods. The same was litigated in Tax Appeals Tribunal Appeal No. 9 of 2018 (consolidated with 84 of 2018), which culminated in the High Court Judgment in Commissioner of Domestic Services v Dutch Flower Group Kenya Income Tax Appeal E101 of 2020 . The said High Court decision upheld the Commissioner’s finding that an agency relationship existed between the respondent and the two foreign entities which decision attracted an appeal to the Court of Appeal, Civil Appeal No. E673 of 2021, which was pending as at the date the parties argued this appeal.
Notwithstanding the pendency of the Court of Appeal case, the Appellant processed the specific refund application for January 2016 to May 2016. By an email dated 15 th December 2022, done approximately six years and five months after the application was lodged, the Appellant informed the Respondent that the refund application had been rejected and concurrently issued Credit Adjustment Vouchers (CAVs).
The Respondent objected to the CAVs on 13 th January 2023. Following the objection, the Appellant issued its formal Objection Decision on 14 th February 2023, reiterating its position that the services were not exported and confirming the rejection of the claim, primarily relying on the reasoning established in the earlier High Court judgment of ITA E101 of 2020.
Aggrieved by the Appellant’s Objection Decision, the Respondent filed an appeal to the Tax Appeals Tribunal, TAT Appeal No. E089 of 2023. On 11 th October 2024, the Tribunal delivered its Judgment, finding that the Appellant had failed to ascertain and determine the refund application within the mandatory ninety (90) days prescribed by Section 47(3) of the TPA. The Tribunal consequently held that the application was deemed ascertained and approved by operation of law.
Having resolved the matter on procedural grounds, the Tribunal declared the substantive issues of agency and zero-rating status as moot. The Tribunal allowed the appeal, set aside the Objection Decision, and ordered the Appellant to refund Kshs 2,603,527.00 within sixty days.
The Appeal
The Appellant was dissatisfied with the entire judgment of the Tribunal’s thus filed the instant appeal vide Memorandum of Appeal dated 19 November 2024. The appeal challenges the judgment on the grounds that; the Tax Appeal Tribunal erred in law by disregarding the objection decision dated 14.02.2023 and basing its finding on a tax decision dated 15.12.2022 contrary to section 52 (1) of the Tax Procedures Act and that the Tribunal erred in law by misconstruing the provisions of section 47 of the Tax Procedures Act.
The Summation of the Appellant’s Case
It is the Appellant’s case that the Tribunal fundamentally misdirected itself by applying Section 47 of the TPA, which governs the refund of overpaid tax, instead of Section 17(5) of the VAT Act, which governs refunds arising from excess input tax due to making zero-rated supplies. The Appellant stresses that a refund arising from zero-rated supplies is not synonymous with an overpayment of tax it being underscored that tax statutes must be strictly construed.
The consequence of applying the wrong provision, the Appellant argues, is that the Tribunal erroneously applied the ninety (90) day processing timeline stipulated under Section 47(3), Tax Procedures Act. It is submitted that Section 17(5) of the VAT Act only prescribes a timeline for the taxpayer to lodge the claim (twelve months) but sets no statutory processing deadline for the Commissioner. Thus, the Tribunal erred by deeming the application as ascertained and approved. On the second limb, the Appellant contends that the Tribunal failed to address the core substantive issues on merit; whether the claim was lodged within the twelve (12) months as mandated by the VAT Act; and, whether the services provided constituted exported services which are zero-rated.
Finally, the Appellant submits that even assuming, without conceding, that TPA Section 47 was applicable, the Tribunal erred in directing the processing of a direct cash refund within sixty (60) days. The Appellant points to the mandatory (“shall”) provisions of TPA Section 47(2)(a), 47(5), which require that any determined refund first be applied to offset outstanding tax debts or future tax liabilities under the specific tax law, then any other tax law, with only the remainder being subject to refund. That the Tribunal’s order failed to account for this mandatory administrative hierarchy.
The Appellant seeks orders allowing the appeal, setting aside the Tribunal’s judgment, and referring the matter back to the Tribunal for hearing and determination on the substantive merits.
The Summation of the Respondent’s Case
The Respondent strenuously supports and defends the Tribunal’s Judgment, arguing that this appeal lacks merit. Its primary argument is that the Tribunal correctly applied Section 47(3) of the TPA. The Respondent asserts that while VAT Act Section 17(5) is the substantive provision creating the entitlement, TPA Section 47 is the mandatory procedural law governing the administration of all tax refunds, including the VAT credit. The Respondent equates the excess input VAT accrued from zero-rated supplies to an overpayment or credit, thus falling squarely within the procedural ambit of the TPA.
The Respondent emphasizes and interprets as mandatory in nature the provisions of TPA Section 47(3) to dictate that ‘w here the Commissioner fails to ascertain and determine an application under subsection (1) within ninety days, the same shall be deemed ascertained and approved’ . To the respondent, the refund application having been lodged on 12 th July 2016 and the rejection issued on 15 th December 2022, the Appellant’s action was grossly out of time, rendering the rejection void by operation of law. That the statutory timeline is deemed mandatory and is reinforced by the constitutional right to fair administrative action under Article 47, which demands efficient and expeditious tax administration.
The Respondent further asserts that since the refund was legally established through procedural means (deemed approval), the Tribunal was correct in deeming moot the substantive issues relating to agency and zero-rating moot for the purposes of this specific refund period. To delve into the substantive merits after the procedural deadline had elapsed and the law had deemed the refund approved would be contrary to the purpose of TPA Section 47(3).
Regarding the Tribunal’s order for a sixty-day cash refund, the Respondent argues this direction was justified by the Appellant’s excessive delay (over nine years since the application) and was necessary to prevent a further miscarriage of justice. Furthermore, the Respondent submits that as a zero-rated supplier, it typically maintains a credit position and is unlikely to have outstanding liabilities, justifying the order for a direct refund.
The Respondent thus prays that the appeal be dismissed in its entirety and the Judgment and Orders of the Tribunal dated 11 th October 2024 be upheld.
Issues, Analysis and Determination
Having dutifully considered the pleadings and submissions presented by both the Appellant and the Respondent, as well as the tribunal’s proceedings and decision, the Court isolates the pertinent issues for determination to be , whether; the Tribunal erred by grounding its decision on the tax claim rejection of 15.12.2022 rather than the Objection Decision of 14.02.2023, contrary to TPA Section 52(1); the refund mechanism for excess input tax from zero-rated supplies, governed by VAT Act Section 17(5), is subject to the deemed approval provision under TPA Section 47(3), and; whether the Tribunal erred in directing a specific cash refund timeline (60 days) without mandating the priority offset sequence prescribed by TPA Section 47(5).
Whether the Tribunal erred by grounding its decision on the initial tax rejection of 15.12.2022 rather than the Objection Decision of 14.02.2023, contrary to TPA Section 52(1)?
The Appellant’s first ground challenges the Tribunal’s determination by arguing that the Tribunal focused on the non-appealable rejection notice of 15 th December 2022, rather than the formal, appealable Objection Decision of 14 th February 2023. Section 52(1) of the TPA allows an appeal only against an appealable decision, which is typically the final Objection Decision.
The Court notes that the Tribunal’s decision was fundamentally based on the procedural legality of the Appellant’s action. The Tribunal asserted that the Appellant’s attempt to reject the claim, whether by the CAVs of 15 th December 2022 or the subsequent Objection Decision of 14 th February 2023, was nullified by the sheer passage of time. The reigning date for computation the statutory timelines for compliance under TPA Section 47(3) is the date the claim was lodged. In this case, the claim was undoubtedly lodged on the 12 th July 2016.
The statutory obligation for the Appellant was to ascertain and determine the application within 90 days from the date of lodgement. That statutory period expired around mid-October 2016. By that point, if TPA Section 47(3) applies, the refund was legally established as deemed ascertained and approved. Any subsequent action attempting to reject the claim, regardless of its formal title of CAVs or Objection Decision, addresses a matter already concluded by statutory operation. This position is affirmed by the holding in the case of Louis Dreyfus Company (K) Ltd vs Kenya Breweries Authority (2021) eKLR where it was held that;
“I therefore find that the Respondent violated the Petitioner’s right to fair administrative action by failing to make a decision on the Petitioner’s application for refund of overpaid tax in one case and failing to make an objection decision in the other case. The statutory timelines were never complied with.
It is not disputed that the Respondent was entitled to interpret the tax laws as it deemed fit. However, it had a duty to ensure that it complied with what the law required of it under sections 47 and 51 of the TP Act. The Petitioner’s claims for refund of overpaid taxes were left in suspense by the Respondent resulting in the violation of the Petitioner’s constitutional and statutory right to fair administrative action. The Petitioner was entitled to know the decisions made by the Respondent on its applications so that it could move to the Tribunal if it was aggrieved by the decisions.” (emphasis provided)
Accordingly, this court holds that the Tribunal rightly focused on the initial rejection notice of 15 th December 2022 as the factual evidence confirming the egregious six-year delay, which provided the basis for invoking the deemed approval rule. The analysis of the merits of the appeal necessarily requires examining the historical procedural propriety which includes all decisions issued by the Appellant. The Tribunal therefore did not err in citing the rejection notice as the evidence of the procedural failure that rendered the entire rejection invalid.
Whether the refund mechanism for excess input tax from zero-rated supplies, governed by VAT Act Section 17(5), is subject to the deemed approval provision under TPA Section 47(3).
This is the gravamen of the Appeal even before the merits thereof is delved into. It is the gist because its determination establishes a roadmap for the next issues.
The Appellant contends that VAT Act Section 17(5), which deals with zero-rated supplies, is silent on processing timelines and should thus operate independently of TPA Section 47(3). To this court, the purpose of the Tax Procedures Act is to provide a comprehensive, uniform legal framework governing tax administration and dispute resolution across all specified tax laws, including the VAT Act. While VAT Act Section 17(5) defines the substantive right to claim excess input tax refund where zero-rated supplies are made, the TPA determines the procedural mechanism for the claim, review and disbursement.
The argument that excess input tax is not overpaid tax for the purpose of TPA Section 47 is unduly restrictive. Where a taxpayer has incurred input VAT but their corresponding output VAT is zero (due to zero-rating), the input tax credit is necessarily a tax paid in excess of the final liability, resulting in a claim for a credit or refund. The phrase in TPA Section 47(1), regarding tax overpaid under “ any law ,” is imperative and deliberately broad to encompass various mechanisms by which a taxpayer derives the right for a refundable credit.
To insist that section 17(5) of the VAT Act Section 17(5) is independent of the procedural discipline of TPA Section 47, is to say that the Act is self-sufficient and a complete code, both as the substantive and procedural law. Such interpretation would make no sense of the unequivocal words of the Tax Procedures Act in its preamble as well as section 47(1) employing the words ‘ under any tax law’ . The court views the timeline set under section 47(3), TPA to import for enforcement the constitutional values and principles of efficiency and procedural fairness, high standards of professional ethics, accountability for administrative actions, and, because tax dispute resolution is a quasi-judicial action, it shall never be delayed. That provision succinctly imports the norms of fair administrative action mandated by Article 47 of the Constitution. The court thus bears the inescapable duty to interpret it in a manner that upholds the constitutional yields expeditious action by the duty bearer, the appellant herein.
The application of TPA Section 47(3) by the tribunal was therefore justified as a necessary procedural safeguard. The mandatory nature of the 90-day period in the TPA Section 47(3) demands strict adherence for the same established position of the law that tax statutes be read for what the clear words are employed to mean. The need for efficiency in processing VAT refunds was articulated in Kenya Data Networks Limited v Kenya Revenue Authority, Nairobi Petition No. 87 of 2012 [2013] eKLR , where the stated that,
" The respondent had a duty to act on the petitioner''s VAT refunds timeously. While recognizing that it is mandated by statute to collect taxes, and while appreciating the pivotal role that collection of taxes plays in a country''s economic development and provision of services for citizens, KRA must also be always cognizant of the possible ramifications of its actions or omissions in dealing with taxpayers, and the impact on investment, revenue collection and the general welfare of the country. While there is no statutory period within which KRA ought to make good tax refund claims, it cannot have any basis for failing to process tax refund claims several months, and in some cases several years after they were made. It is no answer to the petitioner''s claim for tax refund for the respondent to demand in turn that the petitioner pays arrears of tax."
Moreover, in Ericsson Kenya Limited v Attorney General and Others Nairobi Petition No. 506 of 2013 eKLR , the Court considered the responsibility of the Commissioner under the Act in light of the Constitution,
" Whether the respondents acted in accordance with Article 47 of the Constitution is a question of fact which calls for an examination of the circumstances under which the petitioner''s refund claims were dealt with. The Court is not concerned with whether the petitioner is entitled to the amount but whether the process afforded was one that complied with the dictates of Article 47 of the Constitution. In considering the circumstances, it is important to recall that the fact that a taxpayer has lodged a refund claim in accordance with the VAT Act and regulations does not discharge the respondents from the responsibility of examining the claim and confirming that it meets the requirements of the law. The Commissioner, when processing the claim, is not merely a conveyor belt performing a perfunctory exercise. He is required to examine and verify the claim and where irregularities, fraud or other deficiencies are discovered draw the petitioner''s attention to them. The Commissioner is also entitled to call for further information, if necessary, to satisfy himself that the claim meets the legal threshold for payment. Ultimately, the Commissioner is entitled to reject a VAT refund claim by giving written reasons which would entitle the taxpayer to appeal or challenge the decision."
In the circumstances, the Appellant’s failure to act between July 2016 and December 2022 confirms the breach of this mandatory timeline. The consequence, as correctly identified by the Tribunal and affirmed in prior judicial pronouncements, is that the application was deemed ascertained and approved by operation of law.
Flowing from the forgoing, the court finds and holds that the Tribunal did not err in applying the deeming provision under TPA Section 47(3) to the refund claim arising under VAT Act Section 17(5).
Whether the Tribunal erred in directing a specific cash refund timeline (60 days) without mandating the priority offset sequence prescribed by TPA Section 47(5)?
The Appellant’s final ground of appeal focuses on the Tribunal’s specific consequential order, which directed a direct cash refund of KES 2,603,527.00 within sixty days. The Appellant argues this ignores the mandatory application hierarchy set out in TPA Section 47(5).
The court notes that TPA Section 47(5) uses mandatory language “ the Commissioner shall apply the overpayment in the following order ”. This sequence dictates that the refund must first be applied to settle any outstanding tax owing under the specific tax law, then any other tax law, with the remainder being refunded to the taxpayer. This is a statutory safeguard against paying to a taxpayer a tax refund while such tax payer has a pending tax liability. The decision of the tribunal does not and should not invite the interpretation as capable of upsetting or negating on the statutory duty of the appellant.
While the Tribunal’s motivation for specifying a definite timeline (60 days) is justifiable to have stemmed from the Appellant’s demonstrated inefficiency and the nine-year delay, the decision does not extend to waiving a mandatory administrative duty and mandate of the applicant created by the provisions of the TPA. The Appellant retains the statutory duty to verify the Respondent’s current tax compliance status and apply the offset sequence under TPA Section 47(5) prior to issuing a cash payment. In Commissioner of Domestic Taxes v Unga Limited eKLR (Tax Appeal E033 of 2020) , the court held as follows in line with the foregoing:
“I agree with the Tribunal that the Commissioner may not withhold a refund in anticipation of a tax liability. This is borne out section 47(4) of the TPA which provides that a refund is what is paid over when the Commissioner has applied overpayment to, “ payment of any other tax owing by the taxpayer under the tax law”’ and “ payment of a tax owing by the taxpayer under any other tax law.” In this case, the Commissioner did not demonstrate before the Tribunal that Unga owed any tax under the VAT Act , Income Tax Act or any other law which could be applied before the refund. In any case, the letter of 7th October 2014 was clear that the VAT refunds were all processed which means that by that time, the Commissioner had conducted the verification required. It cannot therefore be said that it was acting as a conveyor belt.”
In light of the above, this court having determined that the tribunal did not err in its determination based on section 47(3), further holds that it was not necessary for it to delve into the merits and therefore the fault by the appellant in that respect is wholly unmerited. In any event, the issue regarding agency and zero-rating is already the subject of Civil Appeal No. E673 of 2021 before the Court of Appeal, covering overlapping periods. Resolution on that legal principle should appropriately emanate from the Court of Appeal, and not in this appeal or by remitting the matter back to the Tribunal. The request for remittal is denied for being of no efficacious value.
The upshot of the above discussions and holdings is that the appeal fails in its entirety. It is dismissed with costs to the respondent.
Dated, signed and delivered virtually this 19 th day of November, 2025.
<>><>>'
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI COMMERCIAL & TAX DIVISION
ITA NO. E307 OF 2024
COMMISSIONER OF DOMESTIC TAXES.........................................................APPELLANT
VERSUS
DUTCH FLOWER GROUP KENYA LIMITED..................................................RESPONDENT (Being an appeal arising from the Judgment of the Tax Appeals Tribunal delivered on 11 th October 2024 in Tax Appeals Tribunal Number E089 of 2023)
JUDGMENT
Background
The Appellant herein is the Principal Officer appointed pursuant to Section 13 of the Kenya Revenue Authority Act (Cap 469). The Appellant is mandated to administer and enforce the provisions of tax statutes for the purposes of assessing, collecting, and accounting for all public revenue.
The Respondent is a limited liability company incorporated in Kenya. It is primarily involved in the provision of logistical support services to clients domiciled outside Kenya, specifically Flower Retail Europe BV (hereinafter referred to as “FRE”) and Flower Connect Holding (hereinafter referred to as “FCH”) both based in the Netherlands.
The dispute originated from the Respondent’s claim for a VAT refund relating to excess input tax accumulated from making zero-rated supplies. The Respondent asserted that the services provided under its Service Agreements with FRE and FCH constituted exported services, which were zero-rated under the provisions of the VAT Act. As a result of providing these purportedly zero-rated services, the Respondent accumulated excess VAT credits (input tax exceeding output tax).
On July 12, 2016, the Respondent lodged an application with the Appellant for a VAT refund totalling KES 2,603,527.00, covering the tax period of January 2016 to May 2016. The claim was rejected by the appellant.
The issues around the rejection of the refund claim by the Respondent emerged to be; whether the Respondent acted as an agent of its overseas clientele making the input costs non-deductible to the agent; and, whether the services were truly exported. Those issues had been the subject of prior litigation concerning overlapping tax periods. The same was litigated in Tax Appeals Tribunal Appeal No. 9 of 2018 (consolidated with 84 of 2018), which culminated in the High Court Judgment in Commissioner of Domestic Services v Dutch Flower Group Kenya Income Tax Appeal E101 of 2020 . The said High Court decision upheld the Commissioner’s finding that an agency relationship existed between the respondent and the two foreign entities which decision attracted an appeal to the Court of Appeal, Civil Appeal No. E673 of 2021, which was pending as at the date the parties argued this appeal.
Notwithstanding the pendency of the Court of Appeal case, the Appellant processed the specific refund application for January 2016 to May 2016. By an email dated 15 th December 2022, done approximately six years and five months after the application was lodged, the Appellant informed the Respondent that the refund application had been rejected and concurrently issued Credit Adjustment Vouchers (CAVs).
The Respondent objected to the CAVs on 13 th January 2023. Following the objection, the Appellant issued its formal Objection Decision on 14 th February 2023, reiterating its position that the services were not exported and confirming the rejection of the claim, primarily relying on the reasoning established in the earlier High Court judgment of ITA E101 of 2020.
Aggrieved by the Appellant’s Objection Decision, the Respondent filed an appeal to the Tax Appeals Tribunal, TAT Appeal No. E089 of 2023. On 11 th October 2024, the Tribunal delivered its Judgment, finding that the Appellant had failed to ascertain and determine the refund application within the mandatory ninety (90) days prescribed by Section 47(3) of the TPA. The Tribunal consequently held that the application was deemed ascertained and approved by operation of law.
Having resolved the matter on procedural grounds, the Tribunal declared the substantive issues of agency and zero-rating status as moot. The Tribunal allowed the appeal, set aside the Objection Decision, and ordered the Appellant to refund Kshs 2,603,527.00 within sixty days.
The Appeal
The Appellant was dissatisfied with the entire judgment of the Tribunal’s thus filed the instant appeal vide Memorandum of Appeal dated 19 November 2024. The appeal challenges the judgment on the grounds that; the Tax Appeal Tribunal erred in law by disregarding the objection decision dated 14.02.2023 and basing its finding on a tax decision dated 15.12.2022 contrary to section 52 (1) of the Tax Procedures Act and that the Tribunal erred in law by misconstruing the provisions of section 47 of the Tax Procedures Act.
The Summation of the Appellant’s Case
It is the Appellant’s case that the Tribunal fundamentally misdirected itself by applying Section 47 of the TPA, which governs the refund of overpaid tax, instead of Section 17(5) of the VAT Act, which governs refunds arising from excess input tax due to making zero-rated supplies. The Appellant stresses that a refund arising from zero-rated supplies is not synonymous with an overpayment of tax it being underscored that tax statutes must be strictly construed.
The consequence of applying the wrong provision, the Appellant argues, is that the Tribunal erroneously applied the ninety (90) day processing timeline stipulated under Section 47(3), Tax Procedures Act. It is submitted that Section 17(5) of the VAT Act only prescribes a timeline for the taxpayer to lodge the claim (twelve months) but sets no statutory processing deadline for the Commissioner. Thus, the Tribunal erred by deeming the application as ascertained and approved. On the second limb, the Appellant contends that the Tribunal failed to address the core substantive issues on merit; whether the claim was lodged within the twelve (12) months as mandated by the VAT Act; and, whether the services provided constituted exported services which are zero-rated.
Finally, the Appellant submits that even assuming, without conceding, that TPA Section 47 was applicable, the Tribunal erred in directing the processing of a direct cash refund within sixty (60) days. The Appellant points to the mandatory (“shall”) provisions of TPA Section 47(2)(a), 47(5), which require that any determined refund first be applied to offset outstanding tax debts or future tax liabilities under the specific tax law, then any other tax law, with only the remainder being subject to refund. That the Tribunal’s order failed to account for this mandatory administrative hierarchy.
The Appellant seeks orders allowing the appeal, setting aside the Tribunal’s judgment, and referring the matter back to the Tribunal for hearing and determination on the substantive merits.
The Summation of the Respondent’s Case
The Respondent strenuously supports and defends the Tribunal’s Judgment, arguing that this appeal lacks merit. Its primary argument is that the Tribunal correctly applied Section 47(3) of the TPA. The Respondent asserts that while VAT Act Section 17(5) is the substantive provision creating the entitlement, TPA Section 47 is the mandatory procedural law governing the administration of all tax refunds, including the VAT credit. The Respondent equates the excess input VAT accrued from zero-rated supplies to an overpayment or credit, thus falling squarely within the procedural ambit of the TPA.
The Respondent emphasizes and interprets as mandatory in nature the provisions of TPA Section 47(3) to dictate that ‘w here the Commissioner fails to ascertain and determine an application under subsection (1) within ninety days, the same shall be deemed ascertained and approved’ . To the respondent, the refund application having been lodged on 12 th July 2016 and the rejection issued on 15 th December 2022, the Appellant’s action was grossly out of time, rendering the rejection void by operation of law. That the statutory timeline is deemed mandatory and is reinforced by the constitutional right to fair administrative action under Article 47, which demands efficient and expeditious tax administration.
The Respondent further asserts that since the refund was legally established through procedural means (deemed approval), the Tribunal was correct in deeming moot the substantive issues relating to agency and zero-rating moot for the purposes of this specific refund period. To delve into the substantive merits after the procedural deadline had elapsed and the law had deemed the refund approved would be contrary to the purpose of TPA Section 47(3).
Regarding the Tribunal’s order for a sixty-day cash refund, the Respondent argues this direction was justified by the Appellant’s excessive delay (over nine years since the application) and was necessary to prevent a further miscarriage of justice. Furthermore, the Respondent submits that as a zero-rated supplier, it typically maintains a credit position and is unlikely to have outstanding liabilities, justifying the order for a direct refund.
The Respondent thus prays that the appeal be dismissed in its entirety and the Judgment and Orders of the Tribunal dated 11 th October 2024 be upheld.
Issues, Analysis and Determination
Having dutifully considered the pleadings and submissions presented by both the Appellant and the Respondent, as well as the tribunal’s proceedings and decision, the Court isolates the pertinent issues for determination to be , whether; the Tribunal erred by grounding its decision on the tax claim rejection of 15.12.2022 rather than the Objection Decision of 14.02.2023, contrary to TPA Section 52(1); the refund mechanism for excess input tax from zero-rated supplies, governed by VAT Act Section 17(5), is subject to the deemed approval provision under TPA Section 47(3), and; whether the Tribunal erred in directing a specific cash refund timeline (60 days) without mandating the priority offset sequence prescribed by TPA Section 47(5).
Whether the Tribunal erred by grounding its decision on the initial tax rejection of 15.12.2022 rather than the Objection Decision of 14.02.2023, contrary to TPA Section 52(1)?
The Appellant’s first ground challenges the Tribunal’s determination by arguing that the Tribunal focused on the non-appealable rejection notice of 15 th December 2022, rather than the formal, appealable Objection Decision of 14 th February 2023. Section 52(1) of the TPA allows an appeal only against an appealable decision, which is typically the final Objection Decision.
The Court notes that the Tribunal’s decision was fundamentally based on the procedural legality of the Appellant’s action. The Tribunal asserted that the Appellant’s attempt to reject the claim, whether by the CAVs of 15 th December 2022 or the subsequent Objection Decision of 14 th February 2023, was nullified by the sheer passage of time. The reigning date for computation the statutory timelines for compliance under TPA Section 47(3) is the date the claim was lodged. In this case, the claim was undoubtedly lodged on the 12 th July 2016.
The statutory obligation for the Appellant was to ascertain and determine the application within 90 days from the date of lodgement. That statutory period expired around mid-October 2016. By that point, if TPA Section 47(3) applies, the refund was legally established as deemed ascertained and approved. Any subsequent action attempting to reject the claim, regardless of its formal title of CAVs or Objection Decision, addresses a matter already concluded by statutory operation. This position is affirmed by the holding in the case of Louis Dreyfus Company (K) Ltd vs Kenya Breweries Authority (2021) eKLR where it was held that;
“I therefore find that the Respondent violated the Petitioner’s right to fair administrative action by failing to make a decision on the Petitioner’s application for refund of overpaid tax in one case and failing to make an objection decision in the other case. The statutory timelines were never complied with.
It is not disputed that the Respondent was entitled to interpret the tax laws as it deemed fit. However, it had a duty to ensure that it complied with what the law required of it under sections 47 and 51 of the TP Act. The Petitioner’s claims for refund of overpaid taxes were left in suspense by the Respondent resulting in the violation of the Petitioner’s constitutional and statutory right to fair administrative action. The Petitioner was entitled to know the decisions made by the Respondent on its applications so that it could move to the Tribunal if it was aggrieved by the decisions.” (emphasis provided)
Accordingly, this court holds that the Tribunal rightly focused on the initial rejection notice of 15 th December 2022 as the factual evidence confirming the egregious six-year delay, which provided the basis for invoking the deemed approval rule. The analysis of the merits of the appeal necessarily requires examining the historical procedural propriety which includes all decisions issued by the Appellant. The Tribunal therefore did not err in citing the rejection notice as the evidence of the procedural failure that rendered the entire rejection invalid.
Whether the refund mechanism for excess input tax from zero-rated supplies, governed by VAT Act Section 17(5), is subject to the deemed approval provision under TPA Section 47(3).
This is the gravamen of the Appeal even before the merits thereof is delved into. It is the gist because its determination establishes a roadmap for the next issues.
The Appellant contends that VAT Act Section 17(5), which deals with zero-rated supplies, is silent on processing timelines and should thus operate independently of TPA Section 47(3). To this court, the purpose of the Tax Procedures Act is to provide a comprehensive, uniform legal framework governing tax administration and dispute resolution across all specified tax laws, including the VAT Act. While VAT Act Section 17(5) defines the substantive right to claim excess input tax refund where zero-rated supplies are made, the TPA determines the procedural mechanism for the claim, review and disbursement.
The argument that excess input tax is not overpaid tax for the purpose of TPA Section 47 is unduly restrictive. Where a taxpayer has incurred input VAT but their corresponding output VAT is zero (due to zero-rating), the input tax credit is necessarily a tax paid in excess of the final liability, resulting in a claim for a credit or refund. The phrase in TPA Section 47(1), regarding tax overpaid under “ any law ,” is imperative and deliberately broad to encompass various mechanisms by which a taxpayer derives the right for a refundable credit.
To insist that section 17(5) of the VAT Act Section 17(5) is independent of the procedural discipline of TPA Section 47, is to say that the Act is self-sufficient and a complete code, both as the substantive and procedural law. Such interpretation would make no sense of the unequivocal words of the Tax Procedures Act in its preamble as well as section 47(1) employing the words ‘ under any tax law’ . The court views the timeline set under section 47(3), TPA to import for enforcement the constitutional values and principles of efficiency and procedural fairness, high standards of professional ethics, accountability for administrative actions, and, because tax dispute resolution is a quasi-judicial action, it shall never be delayed. That provision succinctly imports the norms of fair administrative action mandated by Article 47 of the Constitution. The court thus bears the inescapable duty to interpret it in a manner that upholds the constitutional yields expeditious action by the duty bearer, the appellant herein.
The application of TPA Section 47(3) by the tribunal was therefore justified as a necessary procedural safeguard. The mandatory nature of the 90-day period in the TPA Section 47(3) demands strict adherence for the same established position of the law that tax statutes be read for what the clear words are employed to mean. The need for efficiency in processing VAT refunds was articulated in Kenya Data Networks Limited v Kenya Revenue Authority, Nairobi Petition No. 87 of 2012 [2013] eKLR , where the stated that,
" The respondent had a duty to act on the petitioner''s VAT refunds timeously. While recognizing that it is mandated by statute to collect taxes, and while appreciating the pivotal role that collection of taxes plays in a country''s economic development and provision of services for citizens, KRA must also be always cognizant of the possible ramifications of its actions or omissions in dealing with taxpayers, and the impact on investment, revenue collection and the general welfare of the country. While there is no statutory period within which KRA ought to make good tax refund claims, it cannot have any basis for failing to process tax refund claims several months, and in some cases several years after they were made. It is no answer to the petitioner''s claim for tax refund for the respondent to demand in turn that the petitioner pays arrears of tax."
Moreover, in Ericsson Kenya Limited v Attorney General and Others Nairobi Petition No. 506 of 2013 eKLR , the Court considered the responsibility of the Commissioner under the Act in light of the Constitution,
" Whether the respondents acted in accordance with Article 47 of the Constitution is a question of fact which calls for an examination of the circumstances under which the petitioner''s refund claims were dealt with. The Court is not concerned with whether the petitioner is entitled to the amount but whether the process afforded was one that complied with the dictates of Article 47 of the Constitution. In considering the circumstances, it is important to recall that the fact that a taxpayer has lodged a refund claim in accordance with the VAT Act and regulations does not discharge the respondents from the responsibility of examining the claim and confirming that it meets the requirements of the law. The Commissioner, when processing the claim, is not merely a conveyor belt performing a perfunctory exercise. He is required to examine and verify the claim and where irregularities, fraud or other deficiencies are discovered draw the petitioner''s attention to them. The Commissioner is also entitled to call for further information, if necessary, to satisfy himself that the claim meets the legal threshold for payment. Ultimately, the Commissioner is entitled to reject a VAT refund claim by giving written reasons which would entitle the taxpayer to appeal or challenge the decision."
In the circumstances, the Appellant’s failure to act between July 2016 and December 2022 confirms the breach of this mandatory timeline. The consequence, as correctly identified by the Tribunal and affirmed in prior judicial pronouncements, is that the application was deemed ascertained and approved by operation of law.
Flowing from the forgoing, the court finds and holds that the Tribunal did not err in applying the deeming provision under TPA Section 47(3) to the refund claim arising under VAT Act Section 17(5).
Whether the Tribunal erred in directing a specific cash refund timeline (60 days) without mandating the priority offset sequence prescribed by TPA Section 47(5)?
The Appellant’s final ground of appeal focuses on the Tribunal’s specific consequential order, which directed a direct cash refund of KES 2,603,527.00 within sixty days. The Appellant argues this ignores the mandatory application hierarchy set out in TPA Section 47(5).
The court notes that TPA Section 47(5) uses mandatory language “ the Commissioner shall apply the overpayment in the following order ”. This sequence dictates that the refund must first be applied to settle any outstanding tax owing under the specific tax law, then any other tax law, with the remainder being refunded to the taxpayer. This is a statutory safeguard against paying to a taxpayer a tax refund while such tax payer has a pending tax liability. The decision of the tribunal does not and should not invite the interpretation as capable of upsetting or negating on the statutory duty of the appellant.
While the Tribunal’s motivation for specifying a definite timeline (60 days) is justifiable to have stemmed from the Appellant’s demonstrated inefficiency and the nine-year delay, the decision does not extend to waiving a mandatory administrative duty and mandate of the applicant created by the provisions of the TPA. The Appellant retains the statutory duty to verify the Respondent’s current tax compliance status and apply the offset sequence under TPA Section 47(5) prior to issuing a cash payment. In Commissioner of Domestic Taxes v Unga Limited eKLR (Tax Appeal E033 of 2020) , the court held as follows in line with the foregoing:
“I agree with the Tribunal that the Commissioner may not withhold a refund in anticipation of a tax liability. This is borne out section 47(4) of the TPA which provides that a refund is what is paid over when the Commissioner has applied overpayment to, “ payment of any other tax owing by the taxpayer under the tax law”’ and “ payment of a tax owing by the taxpayer under any other tax law.” In this case, the Commissioner did not demonstrate before the Tribunal that Unga owed any tax under the VAT Act , Income Tax Act or any other law which could be applied before the refund. In any case, the letter of 7th October 2014 was clear that the VAT refunds were all processed which means that by that time, the Commissioner had conducted the verification required. It cannot therefore be said that it was acting as a conveyor belt.”
In light of the above, this court having determined that the tribunal did not err in its determination based on section 47(3), further holds that it was not necessary for it to delve into the merits and therefore the fault by the appellant in that respect is wholly unmerited. In any event, the issue regarding agency and zero-rating is already the subject of Civil Appeal No. E673 of 2021 before the Court of Appeal, covering overlapping periods. Resolution on that legal principle should appropriately emanate from the Court of Appeal, and not in this appeal or by remitting the matter back to the Tribunal. The request for remittal is denied for being of no efficacious value.
The upshot of the above discussions and holdings is that the appeal fails in its entirety. It is dismissed with costs to the respondent.
Dated, signed and delivered virtually this 19 th day of November, 2025.
<>><>>'