REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL & TAX DIVISION
HCCOMMITA NO. E031 OF 2023
DUTCH FLOWER GROUP KENYA LTD.......….…….……………APPELLANT
-VERSUS-
THE COMMISSIONER OF DOMESTIC TAXES...……….......…RESPONDENT
RULING
1. The appellant filed a Notice of Motion application dated 20th September, 2023 under the provisions of Article 50 of the Constitution of Kenya, Rules 10 & 17 of the Tax Appeals Tribunal (Appeals to the High Court) Rules, 2015, and all other enabling provisions of the law seeking the following orders –
i) That the appellant be and is hereby granted leave to call a witness to be heard by the Court and be cross-examined by the respondent in the Appeal;
ii) That the appellant be and is hereby granted leave to file the following supplementary documents as evidence:
a) Invoices supporting the costs claimed as input tax in the VAT refund claims;
b) Excerpts of the Appellant/Applicant’s VAT returns illustrating the input tax items;
c) The detailed refund application: and
d) The appellant/applicant’s Audited Financial Statements for the period of 2018-2021.
iii) That this Honourable Court be pleased to grant any other or further orders as it considers just in the circumstances of the case; and
iv) That the costs of this application be in the Appeal.
2. The application is premised on the grounds on the face of the Motion and is supported by an affidavit sworn on the same day by James Kamau, an employee of the appellant. In opposition thereto, the respondent filed a replying affidavit sworn on 12th October, 2023 by Cleopa Otieno, an employee of the respondent currently serving in the Independent Review of Objections Unit of the Kenya Revenue Authority.
3. The application herein was canvassed by way of written submissions. The appellant’s submissions were filed on 7th November, 2023 by the law firm of Mema Advocates LLP, whereas the respondent’s submissions were filed by Kelvin Kinyua Advocate on 15th November, 2023.
4. Mr. Ngure, learned Counsel for the appellant cited the provisions of Section 78 of the Civil Procedure Act and Order42 Rule 7 of the Civil Procedure Rules, 2010 and submitted that despite the fact that Section 56 of the Tax Procedures Act provides that an appeal to the High Court or to the Court of Appeal shall be on a question of law only, this Court has the power to admit additional evidence on appeal. Counsel relied on the provisions of Rule 15 of the Tax Appeals Tribunal (Appeals to the High Court) Rules, which contemplates admission of further evidence. He submitted that this Court as an Appellate Court has the unfettered discretion to admit additional evidence that is relevant and which will aid in the determination of the Appeal.
5. Mr. Ngure relied on the case of Tarmohamed & another v Lakhani & Company [1958] EA567, where the Court of Appeal for Eastern Africa adopted the decision in Ladd v. Marshall [1954] WLR 1489 when setting out the principles governing admission of additional evidence on appeal and the Supreme Court case of Mohamed Abdi Mahmud v Ahmed Abdullahi Mohamed & 3 others [2018] eKLR and stated that the purpose of calling an additional witness and filing supplementary documents is to enable this Honourable Court understand the nature of its business and the transactions which gave rise to the VAT refund claims and thereafter draw its own conclusions and findings. He further stated that the witness to be called and additional documents to be filed will demonstrate that the appellant discharged its tax obligations dutifully and in accordance with the law, which will enable this Court to decide the appeal on merits.
6. Counsel argued that since the appeal relates to VAT refund claims, it is crucial for the appellant to demonstrate that it has excess input tax arising from making zero rated supplies during the tax period under review. He contended that the respondent does not stand to suffer any prejudice in the event that the instant application is allowed since it will have an opportunity to cross-examine the witness and interrogate the documents to be admitted. He stated that the respondent is not a stranger to the documents that the appellant seeks to produce as most of them are in its possession. It was submitted by Mr. Ngure that in admitting additional evidence on appeal, this Court may impose conditions and limitation on how the appellant files the additional evidence such as granting the respondent corresponding leave to file further documents or calling a witness in support of its response to the Appeal.
7. Mr. Kinyua, learned Counsel for the respondent relied on case of Mohammed Abdi Mohamud v Ahmed Abdulahi Mohamad & 3 others (supra), where the Supreme Court laid down the principles for allowing additional evidence. He submitted that the appellant has not met the threshold for grant of leave to file new documents at this stage. He further submitted that the supplementary documents which the appellant seeks to produce were in its custody during the pendency of the proceedings before the Tribunal and at the time of filing the instant Appeal. He expressed the view that the said documents do not qualify as additional new evidence. Counsel argued that the additional evidence the appellant seeks to adduce could have been adduced before the respondent and the Tribunal in view of the fact that the said documents have always been in the appellant’s custody. He stated that the said documents are easily printable from the Appellant’s iTax portal and it only required reasonable diligence to obtain the same.
8. Mr. Kinyua cited the provisions of Section 56(2) of the Tax Procedures Act and argued that the additional documents the appellant seeks to file and the additional witness it seeks to call will raise matters of fact which are not for consideration by the High Court. He asserted that the said documents and witness ought to have formed part of the documents submitted by the appellant for consideration by the respondent during processing of the refund application and at the first appellate stage before the Tribunal. Counsel stated that inviting the High Court to consider documents not presented before the respondent would be inviting the Court to usurp the mandate bestowed on the respondent under Section 5 of the Kenya Revenue Authority Act, which is not only unprocedural but also unlawful.
9. It was submitted by Counsel that issues of facts having already been considered and determined by the Tribunal, the Appellate Court only departs from the Tribunal’s findings of fact in very special circumstances which are not present in this case. He relied on the Court of Appeal case of Attorney General v Torino Enterprises Limited [2019] eKLR and contended that the appellant has not advanced any cogent reason why the documents it seeks to adduce were not availed for consideration by the respondent or filed before the Tribunal. In addition, that the appellant has not demonstrated any difficulty it had in obtaining the supplementary documents before the respondent and/or before the Tribunal. Counsel referred to the Court of Appeal case of Cecilia Wanja Waweru v Jackson Wainaina Muiruri & another [2014] eKLR and stated that the appellant has been in possession of the supplementary documents in question since 30th June, 2022, and that the period between June 2022 and 21st September, 2023 when the instant application was filed amounts to unreasonable delay.
10. Mr. Kinyua submitted that the respondent had requested for the supplementary documents but the appellant failed to produce the same, and now the appellant seeks to adduce the said documents to bolster and fill in the gaps that were not filled before the respondent and the Tribunal by sneaking in the documents at an Appeal stage. Mr. Kinyua cited the case of Attorney General v Torino Enterprises Limited (supra), where the Court of Appeal quoted with authority the case of Mzee Wanje & 93 others v A.K. Saikwa [1982–88] 1 KAR 463. It was stated by Counsel that the respondent stands to suffer prejudice in the event that the orders sought are granted since the supplementary documents are voluminous hence it will not get a chance to respond sufficiently as it has already filed its response and submissions to the Appeal.
ANALYSIS AND DETERMINATION.
11. I have considered the instant application, the grounds on the face of it and the affidavit filed in support thereof, the replying affidavit by the respondent and the written submissions by Counsel for the parties. The issue that arises for determination is whether the appellant has made out a case to warrant being granted leave to call an additional witness and file supplementary documents.
12. The appellant in its supporting affidavit deposed that it is a company incorporated in Kenya, engaged in the business of providing logistical services, which include assistance in sourcing of flowers, verifying the quality of sourced flowers before shipping, ensuring maintenance of procedures and standards that are important to ensure the pristine freshness of the horticultural produce for the contracting parties and the Kenyan growers; as well as maintaining relations on behalf of the contracting parties in Kenya.
13. The appellant averred that it provides the said services contractually to Flower Retail Europe BV (“FRE”) and Flower Connect Holdings BV (“FCH”) which are Dutch companies that import flowers from Kenya to the Netherlands and the rest of Europe. It further averred that in the periods to which the refund applications pertain, it charged VAT at zero percent for providing the foregoing services to the overseas contractors since exported services were zero-rated at the time. That thereafter, it made four VAT refund claims for Kshs.943,092/= for the period of October 2019 to January 2020, but they were rejected through Credit Adjustment Vouchers.
14. The appellant deposed that as a result of the above, it filed a Notice of Objection on 31st March, 2022, but the respondent reiterated its position and rejected the appellant’s objection vide its Objection Decision issued on 17th May, 2022. That subsequently, it appealed against that decision at the Tax Appeals Tribunal, but the Tribunal upheld the respondent’s Objection Decision in a judgment delivered on 10th February, 2023. It was stated by the appellant that it has since filed an appeal against the Tribunal’s judgment.
15. The appellant urged that it seeks leave of this Court to file and adduce supplementary documents so as to demonstrate that the input tax claimed through the refund applications was wholly incurred by the appellant in its own capacity, and it was not attributable to the overseas contractors. It stated that it seeks to introduce invoices in support of the costs claimed as input tax in the refund applications. Further, that the said invoices pertain to the periods covered by the refund applications being January-September 2019, and November 2020-June 2021.
16. Additionally, the appellant deposed that it seeks to introduce excerpts of the relevant VAT Returns itemizing the input tax items as claimed in the said refund applications for purposes of demonstrating that the costs claimed are accounted for through the submitted invoices. The appellant averred that it intends to rely on the excerpts of the VAT returns together with the invoices to ensure the costs claimed in the refund applications can be cross-referenced and traced down to their relevant supporting documentation. Further, it wishes to place reliance on copies of the detailed refund applications which were submitted to the respondent for purposes of proving that the costs claimed as input tax through the refund applications correspond to the expenses incurred and charged through the invoices upon their reconciliation.
17. It was stated by the appellant that to support the legitimacy of its costs claimed as input tax, it wishes to rely on copies of its audited and executed financial statements for the period 2018-2021, which have been verified by licensed audit professionals. The appellant deposed that the proposed additional documents do not introduce a new or inconsistent cause of action as it relates to the same material facts, issues, and circumstances which precipitated the underlying cause of action.
18. The respondent in its replying affidavit averred that the documents the appellant seeks to adduce have been in their possession at all material times during the consideration of the Objection, on appeal at the Tax Appeals Tribunal and cannot be adduced at such an advanced stage of these proceedings. It further averred that the issue before the Court is on the provisions of Section l3(5) of the VAT Act as to whether an agent can claim input tax for a cost incurred by its Principal, and interpretation and application of the VAT Act which this Court is competent to determine. In any event, the respondent stated that the appellant has not disclosed any technical tax issue that requires the testimony of an expert witness.
19. The respondent contended that under Section 51(3) of the Tax Procedures Act, the appellant was afforded sufficient opportunity at the objection stage to adduce all the necessary documents for examination by the respondent but it failed to do so. It asserted that the appellant’s attempt to adduce new documents at this stage is in contravention of the procedure on objections and appeals provided for under Part Vlll of the Tax Procedures Act, and a violation of the respondent’s right to a fair hearing guaranteed by Article 50 of the Constitution of Kenya.
20. The respondent averred that the issue in dispute is res judicata having been heard and determined in Nairobi High Court Income Tax Appeal No. E101 of 2020 Commissioner of Domestic Taxes v Dutch Flowers Group Kenya Limited. It further averred that in exercising its discretion to allow additional evidence, the Court must do so judiciously, thus the appellant is required to provide an explanation as to why the supplementary documents were not adduced in evidence before the respondent, at the objection stage.
Whether the appellant has made out a case to warrant being granted leave to call an additional witness and file supplementary documents.
21. It is trite law that appeals from the Tax Appeals Tribunal to the High Court are restricted only to matters of law pursuant to the provisions of Section 56(2) of the Tax Procedures Act. However, Section 78 of the Civil Procedure Act empowers the High Court to admit additional evidence. It states that -
“Subject to such conditions and limitations as may be prescribed, an appellate court shall have power –
a) to determine a case finally;
b) to remand a case;
c) to frame issues and refer them for trial;
d) to take additional evidence or to require the evidence to be taken;
e) ………..(emphasis added).
22. In addition, Order 42 Rule 27 of the Civil Procedure Rules, 2010 states that-
“(1) The parties to an appeal shall not be entitled to produce additional evidence, whether oral or documentary, in the court to which the appeal is preferred; but if –
a) the court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted; or
b) the court to which the appeal is preferred requires any document to be produced or any witness to be examined to enable it to pronounce judgment, or for any other substantial cause,
the court to which the appeal is preferred may allow such evidence or document to be produced, or witness to be examined.
(2) Wherever additional evidence is allowed to be produced by the court to which the appeal is preferred the court shall record the reason for its admission”.
23. Further, Rule 15 of the Tax Appeals Tribunal (Appeals to the High Court) Rules, 2015 envisages admission of further evidence. It states as follows-
“The Court may, at the time of hearing of an appeal, admit other documentary or oral evidence not contained in the statement of facts of the appellant or respondent should it consider it necessary for determination of the appeal”.
24. In view of the above provisions, I am not persuaded that the additional documents the appellant seeks to file and the additional witness it seeks to call would raise matters of facts which are not for consideration by the High Court as submitted by the respondent.
25. It is worth noting that in as much as this Court has the discretion to admit additional evidence on appeal, the said discretion must be exercised judiciously and not capriciously. The principles governing the admission of additional evidence were laid down by the Court of Appeal for Eastern Africa in Tarmohamed & Another v Lakhani & Company [1958] EA 567 which adopted the decision in Ladd v Marshall [1954] WLR 1489 and stated -
“Except in cases where the application for additional evidence is based on fraud or surprise:
‘to justify reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible”.
26. It is not disputed that all the supplementary documents that the appellant seeks leave to file were in its custody and/or available to it at the time it lodged its objection with the respondent and even during the appeal before the Tax Appeals Tribunal. For this reason, if at all the appellant felt that the said documents were necessary and/or important for the determination of the dispute between the parties herein, it ought to have filed them before the respondent in the objection proceedings and/or the Tax Appeals Tribunal. This Court notes and with utmost concern that despite the fact that the appellant was in possession of the supplementary documents in question at the time it lodged its objection with the respondent and during the appeal before the Tax Appeals Tribunal, it has not offered any explanation as to why it did not file the said documents before them.
27. In view of the above, this Court finds that the documents the appellant seeks leave to adduce at this stage does not amount to new evidence that could not have been obtained with reasonable diligence. The above notwithstanding, the supplementary documents in question consist of documents that every tax payer is by law required to keep records of in a manner that is easily accessible as and when needed as provided for under Section 23 of Tax Procedures Act, 2015 and Section 43 of the Value Added Tax Act, 2013. To this end, I am bound by the Court of Appeal finding in the case of Attorney General v Torino Enterprises Limited (supra) which quoted with authority the case of Mzee Wanje & 93 others v A.K. Saikwa (supra) where it was held that -
“This rule is not intended to enable a party who has discovered fresh evidence to import it nor is it intended for a litigant who has been unsuccessful at the trial to patch up the weak points in his case and fill up omissions in the Court of Appeal. The Rule does not authorize the admission of additional evidence for the purpose of removing lacunae and filing in gaps in evidence. The appellate court must find it needful. Additional evidence should not be admitted to enable a plaintiff to make out a fresh case in appeal. There would be no end to litigation if the rule were used for the purpose of allowing the parties to make out a fresh case or to improve their case by calling further evidence. It follows that the power given should be exercised very sparingly and great caution should be exercised in admitting fresh evidence”
28. I am persuaded that the instant application is an attempt by the appellant to patch up and/or fill up the gaps in its case at this second appeal stage.
29. In the result, this Court finds that the appellant’s application dated 20th September, 2023 is not merited. It is hereby dismissed with costs to the respondent.
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 3rd day of May, 2024. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Ms Chepkwony h/b for Mr. Akhaabi for the appellant/applicant
Mr. Kinyua for the respondent
Ms B. Wokabi – Court Assistant.
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL & TAX DIVISION
HCCOMMITA NO. E031 OF 2023
DUTCH FLOWER GROUP KENYA LTD.......….…….……………APPELLANT
-VERSUS-
THE COMMISSIONER OF DOMESTIC TAXES...……….......…RESPONDENT
RULING
1. The appellant filed a Notice of Motion application dated 20th September, 2023 under the provisions of Article 50 of the Constitution of Kenya, Rules 10 & 17 of the Tax Appeals Tribunal (Appeals to the High Court) Rules, 2015, and all other enabling provisions of the law seeking the following orders –
i) That the appellant be and is hereby granted leave to call a witness to be heard by the Court and be cross-examined by the respondent in the Appeal;
ii) That the appellant be and is hereby granted leave to file the following supplementary documents as evidence:
a) Invoices supporting the costs claimed as input tax in the VAT refund claims;
b) Excerpts of the Appellant/Applicant’s VAT returns illustrating the input tax items;
c) The detailed refund application: and
d) The appellant/applicant’s Audited Financial Statements for the period of 2018-2021.
iii) That this Honourable Court be pleased to grant any other or further orders as it considers just in the circumstances of the case; and
iv) That the costs of this application be in the Appeal.
2. The application is premised on the grounds on the face of the Motion and is supported by an affidavit sworn on the same day by James Kamau, an employee of the appellant. In opposition thereto, the respondent filed a replying affidavit sworn on 12th October, 2023 by Cleopa Otieno, an employee of the respondent currently serving in the Independent Review of Objections Unit of the Kenya Revenue Authority.
3. The application herein was canvassed by way of written submissions. The appellant’s submissions were filed on 7th November, 2023 by the law firm of Mema Advocates LLP, whereas the respondent’s submissions were filed by Kelvin Kinyua Advocate on 15th November, 2023.
4. Mr. Ngure, learned Counsel for the appellant cited the provisions of Section 78 of the Civil Procedure Act and Order42 Rule 7 of the Civil Procedure Rules, 2010 and submitted that despite the fact that Section 56 of the Tax Procedures Act provides that an appeal to the High Court or to the Court of Appeal shall be on a question of law only, this Court has the power to admit additional evidence on appeal. Counsel relied on the provisions of Rule 15 of the Tax Appeals Tribunal (Appeals to the High Court) Rules, which contemplates admission of further evidence. He submitted that this Court as an Appellate Court has the unfettered discretion to admit additional evidence that is relevant and which will aid in the determination of the Appeal.
5. Mr. Ngure relied on the case of Tarmohamed & another v Lakhani & Company [1958] EA567, where the Court of Appeal for Eastern Africa adopted the decision in Ladd v. Marshall [1954] WLR 1489 when setting out the principles governing admission of additional evidence on appeal and the Supreme Court case of Mohamed Abdi Mahmud v Ahmed Abdullahi Mohamed & 3 others [2018] eKLR and stated that the purpose of calling an additional witness and filing supplementary documents is to enable this Honourable Court understand the nature of its business and the transactions which gave rise to the VAT refund claims and thereafter draw its own conclusions and findings. He further stated that the witness to be called and additional documents to be filed will demonstrate that the appellant discharged its tax obligations dutifully and in accordance with the law, which will enable this Court to decide the appeal on merits.
6. Counsel argued that since the appeal relates to VAT refund claims, it is crucial for the appellant to demonstrate that it has excess input tax arising from making zero rated supplies during the tax period under review. He contended that the respondent does not stand to suffer any prejudice in the event that the instant application is allowed since it will have an opportunity to cross-examine the witness and interrogate the documents to be admitted. He stated that the respondent is not a stranger to the documents that the appellant seeks to produce as most of them are in its possession. It was submitted by Mr. Ngure that in admitting additional evidence on appeal, this Court may impose conditions and limitation on how the appellant files the additional evidence such as granting the respondent corresponding leave to file further documents or calling a witness in support of its response to the Appeal.
7. Mr. Kinyua, learned Counsel for the respondent relied on case of Mohammed Abdi Mohamud v Ahmed Abdulahi Mohamad & 3 others (supra), where the Supreme Court laid down the principles for allowing additional evidence. He submitted that the appellant has not met the threshold for grant of leave to file new documents at this stage. He further submitted that the supplementary documents which the appellant seeks to produce were in its custody during the pendency of the proceedings before the Tribunal and at the time of filing the instant Appeal. He expressed the view that the said documents do not qualify as additional new evidence. Counsel argued that the additional evidence the appellant seeks to adduce could have been adduced before the respondent and the Tribunal in view of the fact that the said documents have always been in the appellant’s custody. He stated that the said documents are easily printable from the Appellant’s iTax portal and it only required reasonable diligence to obtain the same.
8. Mr. Kinyua cited the provisions of Section 56(2) of the Tax Procedures Act and argued that the additional documents the appellant seeks to file and the additional witness it seeks to call will raise matters of fact which are not for consideration by the High Court. He asserted that the said documents and witness ought to have formed part of the documents submitted by the appellant for consideration by the respondent during processing of the refund application and at the first appellate stage before the Tribunal. Counsel stated that inviting the High Court to consider documents not presented before the respondent would be inviting the Court to usurp the mandate bestowed on the respondent under Section 5 of the Kenya Revenue Authority Act, which is not only unprocedural but also unlawful.
9. It was submitted by Counsel that issues of facts having already been considered and determined by the Tribunal, the Appellate Court only departs from the Tribunal’s findings of fact in very special circumstances which are not present in this case. He relied on the Court of Appeal case of Attorney General v Torino Enterprises Limited [2019] eKLR and contended that the appellant has not advanced any cogent reason why the documents it seeks to adduce were not availed for consideration by the respondent or filed before the Tribunal. In addition, that the appellant has not demonstrated any difficulty it had in obtaining the supplementary documents before the respondent and/or before the Tribunal. Counsel referred to the Court of Appeal case of Cecilia Wanja Waweru v Jackson Wainaina Muiruri & another [2014] eKLR and stated that the appellant has been in possession of the supplementary documents in question since 30th June, 2022, and that the period between June 2022 and 21st September, 2023 when the instant application was filed amounts to unreasonable delay.
10. Mr. Kinyua submitted that the respondent had requested for the supplementary documents but the appellant failed to produce the same, and now the appellant seeks to adduce the said documents to bolster and fill in the gaps that were not filled before the respondent and the Tribunal by sneaking in the documents at an Appeal stage. Mr. Kinyua cited the case of Attorney General v Torino Enterprises Limited (supra), where the Court of Appeal quoted with authority the case of Mzee Wanje & 93 others v A.K. Saikwa [1982–88] 1 KAR 463. It was stated by Counsel that the respondent stands to suffer prejudice in the event that the orders sought are granted since the supplementary documents are voluminous hence it will not get a chance to respond sufficiently as it has already filed its response and submissions to the Appeal.
ANALYSIS AND DETERMINATION.
11. I have considered the instant application, the grounds on the face of it and the affidavit filed in support thereof, the replying affidavit by the respondent and the written submissions by Counsel for the parties. The issue that arises for determination is whether the appellant has made out a case to warrant being granted leave to call an additional witness and file supplementary documents.
12. The appellant in its supporting affidavit deposed that it is a company incorporated in Kenya, engaged in the business of providing logistical services, which include assistance in sourcing of flowers, verifying the quality of sourced flowers before shipping, ensuring maintenance of procedures and standards that are important to ensure the pristine freshness of the horticultural produce for the contracting parties and the Kenyan growers; as well as maintaining relations on behalf of the contracting parties in Kenya.
13. The appellant averred that it provides the said services contractually to Flower Retail Europe BV (“FRE”) and Flower Connect Holdings BV (“FCH”) which are Dutch companies that import flowers from Kenya to the Netherlands and the rest of Europe. It further averred that in the periods to which the refund applications pertain, it charged VAT at zero percent for providing the foregoing services to the overseas contractors since exported services were zero-rated at the time. That thereafter, it made four VAT refund claims for Kshs.943,092/= for the period of October 2019 to January 2020, but they were rejected through Credit Adjustment Vouchers.
14. The appellant deposed that as a result of the above, it filed a Notice of Objection on 31st March, 2022, but the respondent reiterated its position and rejected the appellant’s objection vide its Objection Decision issued on 17th May, 2022. That subsequently, it appealed against that decision at the Tax Appeals Tribunal, but the Tribunal upheld the respondent’s Objection Decision in a judgment delivered on 10th February, 2023. It was stated by the appellant that it has since filed an appeal against the Tribunal’s judgment.
15. The appellant urged that it seeks leave of this Court to file and adduce supplementary documents so as to demonstrate that the input tax claimed through the refund applications was wholly incurred by the appellant in its own capacity, and it was not attributable to the overseas contractors. It stated that it seeks to introduce invoices in support of the costs claimed as input tax in the refund applications. Further, that the said invoices pertain to the periods covered by the refund applications being January-September 2019, and November 2020-June 2021.
16. Additionally, the appellant deposed that it seeks to introduce excerpts of the relevant VAT Returns itemizing the input tax items as claimed in the said refund applications for purposes of demonstrating that the costs claimed are accounted for through the submitted invoices. The appellant averred that it intends to rely on the excerpts of the VAT returns together with the invoices to ensure the costs claimed in the refund applications can be cross-referenced and traced down to their relevant supporting documentation. Further, it wishes to place reliance on copies of the detailed refund applications which were submitted to the respondent for purposes of proving that the costs claimed as input tax through the refund applications correspond to the expenses incurred and charged through the invoices upon their reconciliation.
17. It was stated by the appellant that to support the legitimacy of its costs claimed as input tax, it wishes to rely on copies of its audited and executed financial statements for the period 2018-2021, which have been verified by licensed audit professionals. The appellant deposed that the proposed additional documents do not introduce a new or inconsistent cause of action as it relates to the same material facts, issues, and circumstances which precipitated the underlying cause of action.
18. The respondent in its replying affidavit averred that the documents the appellant seeks to adduce have been in their possession at all material times during the consideration of the Objection, on appeal at the Tax Appeals Tribunal and cannot be adduced at such an advanced stage of these proceedings. It further averred that the issue before the Court is on the provisions of Section l3(5) of the VAT Act as to whether an agent can claim input tax for a cost incurred by its Principal, and interpretation and application of the VAT Act which this Court is competent to determine. In any event, the respondent stated that the appellant has not disclosed any technical tax issue that requires the testimony of an expert witness.
19. The respondent contended that under Section 51(3) of the Tax Procedures Act, the appellant was afforded sufficient opportunity at the objection stage to adduce all the necessary documents for examination by the respondent but it failed to do so. It asserted that the appellant’s attempt to adduce new documents at this stage is in contravention of the procedure on objections and appeals provided for under Part Vlll of the Tax Procedures Act, and a violation of the respondent’s right to a fair hearing guaranteed by Article 50 of the Constitution of Kenya.
20. The respondent averred that the issue in dispute is res judicata having been heard and determined in Nairobi High Court Income Tax Appeal No. E101 of 2020 Commissioner of Domestic Taxes v Dutch Flowers Group Kenya Limited. It further averred that in exercising its discretion to allow additional evidence, the Court must do so judiciously, thus the appellant is required to provide an explanation as to why the supplementary documents were not adduced in evidence before the respondent, at the objection stage.
Whether the appellant has made out a case to warrant being granted leave to call an additional witness and file supplementary documents.
21. It is trite law that appeals from the Tax Appeals Tribunal to the High Court are restricted only to matters of law pursuant to the provisions of Section 56(2) of the Tax Procedures Act. However, Section 78 of the Civil Procedure Act empowers the High Court to admit additional evidence. It states that -
“Subject to such conditions and limitations as may be prescribed, an appellate court shall have power –
a) to determine a case finally;
b) to remand a case;
c) to frame issues and refer them for trial;
d) to take additional evidence or to require the evidence to be taken;
e) ………..(emphasis added).
22. In addition, Order 42 Rule 27 of the Civil Procedure Rules, 2010 states that-
“(1) The parties to an appeal shall not be entitled to produce additional evidence, whether oral or documentary, in the court to which the appeal is preferred; but if –
a) the court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted; or
b) the court to which the appeal is preferred requires any document to be produced or any witness to be examined to enable it to pronounce judgment, or for any other substantial cause,
the court to which the appeal is preferred may allow such evidence or document to be produced, or witness to be examined.
(2) Wherever additional evidence is allowed to be produced by the court to which the appeal is preferred the court shall record the reason for its admission”.
23. Further, Rule 15 of the Tax Appeals Tribunal (Appeals to the High Court) Rules, 2015 envisages admission of further evidence. It states as follows-
“The Court may, at the time of hearing of an appeal, admit other documentary or oral evidence not contained in the statement of facts of the appellant or respondent should it consider it necessary for determination of the appeal”.
24. In view of the above provisions, I am not persuaded that the additional documents the appellant seeks to file and the additional witness it seeks to call would raise matters of facts which are not for consideration by the High Court as submitted by the respondent.
25. It is worth noting that in as much as this Court has the discretion to admit additional evidence on appeal, the said discretion must be exercised judiciously and not capriciously. The principles governing the admission of additional evidence were laid down by the Court of Appeal for Eastern Africa in Tarmohamed & Another v Lakhani & Company [1958] EA 567 which adopted the decision in Ladd v Marshall [1954] WLR 1489 and stated -
“Except in cases where the application for additional evidence is based on fraud or surprise:
‘to justify reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible”.
26. It is not disputed that all the supplementary documents that the appellant seeks leave to file were in its custody and/or available to it at the time it lodged its objection with the respondent and even during the appeal before the Tax Appeals Tribunal. For this reason, if at all the appellant felt that the said documents were necessary and/or important for the determination of the dispute between the parties herein, it ought to have filed them before the respondent in the objection proceedings and/or the Tax Appeals Tribunal. This Court notes and with utmost concern that despite the fact that the appellant was in possession of the supplementary documents in question at the time it lodged its objection with the respondent and during the appeal before the Tax Appeals Tribunal, it has not offered any explanation as to why it did not file the said documents before them.
27. In view of the above, this Court finds that the documents the appellant seeks leave to adduce at this stage does not amount to new evidence that could not have been obtained with reasonable diligence. The above notwithstanding, the supplementary documents in question consist of documents that every tax payer is by law required to keep records of in a manner that is easily accessible as and when needed as provided for under Section 23 of Tax Procedures Act, 2015 and Section 43 of the Value Added Tax Act, 2013. To this end, I am bound by the Court of Appeal finding in the case of Attorney General v Torino Enterprises Limited (supra) which quoted with authority the case of Mzee Wanje & 93 others v A.K. Saikwa (supra) where it was held that -
“This rule is not intended to enable a party who has discovered fresh evidence to import it nor is it intended for a litigant who has been unsuccessful at the trial to patch up the weak points in his case and fill up omissions in the Court of Appeal. The Rule does not authorize the admission of additional evidence for the purpose of removing lacunae and filing in gaps in evidence. The appellate court must find it needful. Additional evidence should not be admitted to enable a plaintiff to make out a fresh case in appeal. There would be no end to litigation if the rule were used for the purpose of allowing the parties to make out a fresh case or to improve their case by calling further evidence. It follows that the power given should be exercised very sparingly and great caution should be exercised in admitting fresh evidence”
28. I am persuaded that the instant application is an attempt by the appellant to patch up and/or fill up the gaps in its case at this second appeal stage.
29. In the result, this Court finds that the appellant’s application dated 20th September, 2023 is not merited. It is hereby dismissed with costs to the respondent.
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 3rd day of May, 2024. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Ms Chepkwony h/b for Mr. Akhaabi for the appellant/applicant
Mr. Kinyua for the respondent
Ms B. Wokabi – Court Assistant.