1. The appellant filed a Notice of Motion application dated 17th January 2025 under the provisions of Sections 1A, 1B, 3A and 63(c) of the Civil Procedure Act, Order 42 Rule 6 and Order 51 Rules 1 & 3 of the Civil Procedure Rules, Section 42(14) (e) of the Tax Procedures Act, Rules 17 & 20 of the Tax Appeals Tribunal (Appeals to the High Court) Rules, 2015 and all other enabling provisions of the law. The appellant seeks orders for a declaration that the Agency Notice dated 20th December 2024 is null, void and of no legal effect under Section 42(14)(e) of the Tax Procedures Act, 2015, and an quashing the said Notice. In the alternative, the appellant seeks an order for stay of execution and enforcement of the said Agency Notice and an order prohibiting the respondent, its officers, agents, or servants from issuing any further Agency Notices or instituting any enforcement action in respect of the taxes that are the subject matter of this Appeal, pending the determination of this Appeal.
2. The application is premised on the grounds on the face of the Motion, and it is supported by an affidavit sworn on the same day by Mr. Ketan Gandhi, the appellant’s Finance Manager. Mr. Gandhi averred that the appellant, a private limited company engaged in estate and property management, was issued with a VAT assessment by the respondent on 24th November 2023 demanding Kshs.11,678,587.66 for the period 1st January to 31st October 2022. That the appellant objected to the assessment, but the respondent upheld it on 25th March 2024, demanding Kshs.12,379,302.00 inclusive of penalties and interest. He stated that dissatisfied with the said decision, the appellant appealed to the Tax Appeals Tribunal, which upheld the assessment in its Judgment delivered on 22nd November 2024. Consequently, the appellant filed an Appeal with this Court.
3. Mr. Gandhi deposed that subsequently, the respondent issued an Agency Notice to the appellant’s banker, I&M Bank Limited, demanding payment of the assessed VAT, notwithstanding that the Appeal had been filed and was pending determination. He contended that the Agency Notice is contrary to Section 42(14)(e) of the Tax Procedures Act, 2015, which prohibits the respondent from issuing Agency Notices once an Appeal has been lodged within statutory timelines. He asserted that the issuance of the Agency Notice during the pendency of this Appeal constitutes undue haste and an attempt to pre-empt the appellant’s statutory rights and that enforcement of the same would cause the appellant to suffer irreparable financial harm and potentially paralyze its operations.
4. In opposition to the application herein, the respondent filed a replying affidavit sworn on 24th March 2025 by Mr. Kevin Lengete, an officer of the respondent. Mr. Lengete averred that the appellant, dissatisfied with the respondent’s VAT assessments for the period November 2021 to October 2022, appealed to the Tax Appeals Tribunal, which in a Judgment delivered on 22nd November 2024 upheld the assessments totaling Kshs.12,379,302.92. That subsequently, the respondent in exercise of its statutory mandate under Sections 5 of the KRA Act and 42 of the Tax Procedures Act, issued Agency Notices to the appellant’s banker, I&M Bank Limited, demanding payment of the taxes due. He contended that at the time of issuance of the said Agency Notice, there was no evidence that the appellant had filed or served its Appeal on the respondent.
5. Mr. Lengete deposed that a Notice of Appeal does not automatically operate as a stay of execution. He maintained that the appellant has not demonstrated a prima facie case for stay of execution and that enforcement of the Tribunal’s Judgment would not prejudice the Appeal, as any refunds due are recoverable under Sections 47 & 47A of the Tax Procedures Act. Mr. Lengete asserted that the taxes are long outstanding, crystallized and essential for government operations, thus an order for stay of execution without security would prejudice the respondent and impede critical public services. He urged this Court that in the event an order for stay of execution is granted, then it should be conditional upon the appellant depositing security to safeguard the taxes in dispute.
6. The application herein was canvassed by way of written submissions. The appellant’s submissions were filed on 12th June 2025 by the law firm of Anjarwalla & Khanna LLP, whereas the respondent’s submissions were filed by Edgar Isutsa, Advocate on 27th June 2025.
7. Ms Muna Abdullahi, learned Counsel for the appellant submitted that this Court granted a conditional stay of execution on 21st January 2025, staying execution and enforcement of the respondent’s Agency Notice dated 20th December 2024, subject to deposit of Kshs.6,000,000/=. She contended that the respondent’s issuance of the subject Agency Notice before the statutory timelines for filing the Memorandum and Record of Appeal had lapsed, contravenes Section 42(14)(e) of the Tax Procedures Act, 2015, which precludes enforcement action once an Appeal has been lodged.
8. Counsel argued that that the respondent’s actions circumvented its statutory right to appeal, amounted to premature enforcement, and violated constitutional rights to access justice and equality before the law enshrined under Articles 48 & 27 of the Constitution, respectively. Ms Muna relied on the provisions of Section 32 of the Tax Appeals Tribunal Act, 2013, Rule 3 of the High Court Rules, and the decision in the case of Kombani Autoworks Limited v Commissioner of Domestic Taxes [2023] KETAT 988 (KLR), and submitted that although this Appeal was filed ten days after the subject Agency Notice, it was filed within the requisite statutory timelines, rendering the Agency Notice of no legal effect.
9. Mr. Isutsa, learned Counsel for the respondent relied on the provisions of Order 42 Rule 6 of the Civil Procedure Rules, 2010, and the Court of Appeal case of Butt v Rent Restriction Tribunal [1979] KECA 22 (KLR), and contended that the instant application was filed unreasonably late, following the issuance of Agency Notices on 20th December 2024 and that the appellant failed to serve its Notice of Appeal on the respondent as required under Section 32(2) of the Tax Appeals Tribunal Act. Counsel cited the case of Kenya Women Microfinance Ltd v Martha Wangari Kamau [2020] KEHC 4845 (KLR) and argued that the appellant has not shown any evidence of substantial loss beyond the ordinary consequence of paying taxes.
10. He cited the case of Gianfranco Manenthi & another v Africa Merchant Assurance Company Ltd [2019] KEHC 7586 (KLR) and stated that the appellant had failed to comply with the Court’s Order of 21st January 2025 requiring a deposit of Kshs.6,000,000/= as security. On the question of the Agency Notices, Mr. Isutsa contended that they were properly issued pursuant to Section 42(14)(e) of the Tax Procedures Act to recover taxes due, given that no valid Appeal had been served at the time. He submitted that the appellant seeks merely to delay the collection of taxes lawfully assessed and urged the Court to dismiss the instant application with costs.
ANALYSIS AND DETERMINATION.
11. Upon consideration of the application herein, the grounds on the face of it, and the affidavit filed in support thereof, as well as the replying affidavit by the respondent and the written submissions by Counsel for the parties, the issues that arise for determination are –
i) Whether the Agency Notice dated 20th December 2024 was properly issued upon the appellant;
ii) Whether an order for stay of execution should be granted; and
iii) Whether an order of prohibition should be granted.
Whether the Agency Notice dated 20th December 2024 was properly issued upon the appellant.
12. The appellant seeks a declaration to the effect that the Agency Notice dated 20th December 2024 be declared null and void and an order to quash the same, pursuant to the provisions of Section 42(14)(e) of the Tax Procedures Act, 2015. The appellant argued that the said Notice was issued prematurely, before the statutory period for filing a Memorandum and Record of Appeal against the Tax Appeals Tribunal’s Judgment had expired, thereby contravening the provisions of Section 42(14)(e) of the Tax Procedures Act, which bars enforcement action once an Appeal has been filed. The respondent on the other hand contended that the subject Agency Notice was validly issued under Section 5 of the KRA Act and Section 42 of the Tax Procedures Act to recover taxes due and asserted that the filing of a Notice of Appeal does not automatically suspend the enforcement of tax obligations.
13. The appellant was issued with a VAT assessment by the respondent on 24th November 2023, amounting to Kshs.11,678,587.66 for the period from 1st January to 31st October 2022. The appellant lodged an objection to the assessment, but the respondent upheld it on 25th March 2024, revising the total to Kshs.12,379,302.00, inclusive of penalties and interest. Aggrieved by that decision, the appellant appealed to the Tax Appeals Tribunal, which affirmed the assessment in its Judgment delivered on 22nd November 2024, prompting the appellant to subsequently file an Appeal with this Court.
14. It is also not disputed that the Appeal was filed within the timelines prescribed under Section 32 of the Tax Appeals Tribunal Act, and the Agency Notice dated 20th December 2024 was issued before the expiry of the statutory period for filing a Memorandum and Record of Appeal against the Tax Appeals Tribunal’s Judgment. Section 42(14)(e) of the Tax Procedures Act, which has been extensively cited by both parties, provides as follows -
The Commissioner shall not issue a Notice under this section unless -
a) the taxpayer or the non-resident person who is subject to tax in Kenya has defaulted in paying an instalment under section 33 (2);
b) the Commissioner has raised an assessment and the taxpayer or the non-resident person who is subject to tax in Kenya has not objected to or challenged the validity of the assessment within the prescribed period;
c) the taxpayer or the non-resident person who is subject to tax in Kenya has not Appealed against an assessment specified in an objection decision within the prescribed timelines;
d) the taxpayer or the non-resident person who is subject to tax in Kenya has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; or
e) the taxpayer has not Appealed against an assessment specified in a decision of the Tribunal or court. (Emphasis added).
15. Mr. Isutsa, learned Counsel for the respondent, submitted that Section 42(14)(e) of the Tax Procedures Act had been deleted by the New Finance Act. However, a review of the Finance Act, No. 4 of 2023, shows that Section 57 provides as follows-
Section 42 of the Tax Procedures Act, 2015, is amended by deleting subsection (14) and substituting therefor the following new subsection -
(14) The Commissioner shall not issue a Notice under this section unless -
a) the taxpayer has defaulted in paying an instalment under section 33(2);
b) the Commissioner has raised an assessment and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period;
c) the taxpayer has not Appealed against an assessment specified in an objection decision within the prescribed timelines;
d) the taxpayer has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; or
e) the taxpayer has not Appealed against an assessment specified in a decision of the Tribunal or court. (Emphasis added).
16. Upon review of the Finance Act, No. 9 of 2025, this Court notes that under Section 53, only subsections 14(a), (b), (c), and (d) were amended, leaving subsection 14(e) undisturbed. Consequently, I am not persuaded that Section 42(14)(e) of the Tax Procedures Act was deleted by the New Finance Act.
17. This Court finds that Section 42(14)(e) of the Tax Procedures Act bars and restricts the respondent from issuing demands, Notices, or taking any recovery measures before the statutory period for filing an appeal has expired or after a valid appeal has been filed. Therefore, having found that the Agency Notice dated 20th December 2024 was issued before the expiry of the statutory period for filing a Memorandum and Record of Appeal against the Tax Appeals Tribunal’s Judgment, I am satisfied that the subject Agency Notice was issued prematurely and in contravention of Section 42(14)(e) of the Tax Procedures Act.
18. Consequently, this Court finds that the Agency Notice dated 20th December 2024 was issued irregularly and is therefore null, void and of no legal effect.
19. Accordingly, as the order for stay of execution constitutes an alternative form of relief, the Court shall not consider it in light of the above finding.
Whether an order of prohibition should be granted.
20. The appellant also seeks an order restraining the respondent, its officers, agents, or servants from issuing any further Agency Notices or initiating any enforcement action in respect of the taxes that are the subject of this Appeal. The appellant contended that any such enforcement at this stage would cause irreparable harm, including disruption of its business operations and undue prejudice, which cannot be adequately compensated by an award of damages.
21. Although prohibition is a legal remedy, its effect is akin to that of an interlocutory injunction, in that it restrains a party from taking or continuing action that may prejudice the rights of another party pending the determination of substantive proceedings. Consequently, in determining whether an order of prohibition should issue, the Court is guided by principles analogous to those governing the grant of interlocutory injunctions as set out by the Court in Giella v Cassman Brown & Co. Ltd [1973] EA 358 as hereunder –
Firstly, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the Court is in doubt, it will decide an application on the balance of convenience.
22. Noting that appeals from the Tax Appeals Tribunal to the High Court are confined to questions of law, and that this Appeal requires the Court to inter alia, determine whether reimbursable payroll costs constitute a taxable supply under Section 5 of the VAT Act, 2013, in light of Section 13(5) of the same Act, this Court is satisfied that the appellant’s Appeal is arguable and warrants the appellant to being granted an order of prohibition.
23. Taking into consideration the provisions of Section 42(14)(e) of the Tax Procedures Act and the long and onerous process the appellant would face to recover any taxes collected should this Appeal succeed, this Court is persuaded that the appellant stands to suffer significant prejudice, including disruption of its business operations, if the orders being sought herein are not granted. To the contrary, the respondent would face minimal difficulty in recovering the taxes if the Appeal is unsuccessful.
24. On the totality of the evidence on record from the averments made, I am satisfied that the appellant has established a case to warrant being granted an order of prohibition against the respondent.
25. In the result, this Court finds that the instant application is merited and it is hereby allowed in the following terms -
i) A declaration is hereby issued that the Agency Notice dated 20th December 2024 is null, void and of no legal effect;
ii) An order quashing the said Notice is hereby granted;
iii) An order is hereby granted prohibiting the respondent, its officers, agents, or servants from issuing any further Agency Notices or instituting any enforcement action in respect of the taxes that are the subject matter of this Appeal, pending the determination of this Appeal; and
iv) Costs shall abide the outcome of the Appeal.
It is so ordered
DATED, SIGNED and DELIVERED at NAIROBI on this 5th day of December 2025. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:-
Ms Muna Abdullahi for the appellant/applicant
Mr. Isutsa for the respondent
Ms B. Wokabi – Court Assistant.
2. The application is premised on the grounds on the face of the Motion, and it is supported by an affidavit sworn on the same day by Mr. Ketan Gandhi, the appellant’s Finance Manager. Mr. Gandhi averred that the appellant, a private limited company engaged in estate and property management, was issued with a VAT assessment by the respondent on 24th November 2023 demanding Kshs.11,678,587.66 for the period 1st January to 31st October 2022. That the appellant objected to the assessment, but the respondent upheld it on 25th March 2024, demanding Kshs.12,379,302.00 inclusive of penalties and interest. He stated that dissatisfied with the said decision, the appellant appealed to the Tax Appeals Tribunal, which upheld the assessment in its Judgment delivered on 22nd November 2024. Consequently, the appellant filed an Appeal with this Court.
3. Mr. Gandhi deposed that subsequently, the respondent issued an Agency Notice to the appellant’s banker, I&M Bank Limited, demanding payment of the assessed VAT, notwithstanding that the Appeal had been filed and was pending determination. He contended that the Agency Notice is contrary to Section 42(14)(e) of the Tax Procedures Act, 2015, which prohibits the respondent from issuing Agency Notices once an Appeal has been lodged within statutory timelines. He asserted that the issuance of the Agency Notice during the pendency of this Appeal constitutes undue haste and an attempt to pre-empt the appellant’s statutory rights and that enforcement of the same would cause the appellant to suffer irreparable financial harm and potentially paralyze its operations.
4. In opposition to the application herein, the respondent filed a replying affidavit sworn on 24th March 2025 by Mr. Kevin Lengete, an officer of the respondent. Mr. Lengete averred that the appellant, dissatisfied with the respondent’s VAT assessments for the period November 2021 to October 2022, appealed to the Tax Appeals Tribunal, which in a Judgment delivered on 22nd November 2024 upheld the assessments totaling Kshs.12,379,302.92. That subsequently, the respondent in exercise of its statutory mandate under Sections 5 of the KRA Act and 42 of the Tax Procedures Act, issued Agency Notices to the appellant’s banker, I&M Bank Limited, demanding payment of the taxes due. He contended that at the time of issuance of the said Agency Notice, there was no evidence that the appellant had filed or served its Appeal on the respondent.
5. Mr. Lengete deposed that a Notice of Appeal does not automatically operate as a stay of execution. He maintained that the appellant has not demonstrated a prima facie case for stay of execution and that enforcement of the Tribunal’s Judgment would not prejudice the Appeal, as any refunds due are recoverable under Sections 47 & 47A of the Tax Procedures Act. Mr. Lengete asserted that the taxes are long outstanding, crystallized and essential for government operations, thus an order for stay of execution without security would prejudice the respondent and impede critical public services. He urged this Court that in the event an order for stay of execution is granted, then it should be conditional upon the appellant depositing security to safeguard the taxes in dispute.
6. The application herein was canvassed by way of written submissions. The appellant’s submissions were filed on 12th June 2025 by the law firm of Anjarwalla & Khanna LLP, whereas the respondent’s submissions were filed by Edgar Isutsa, Advocate on 27th June 2025.
7. Ms Muna Abdullahi, learned Counsel for the appellant submitted that this Court granted a conditional stay of execution on 21st January 2025, staying execution and enforcement of the respondent’s Agency Notice dated 20th December 2024, subject to deposit of Kshs.6,000,000/=. She contended that the respondent’s issuance of the subject Agency Notice before the statutory timelines for filing the Memorandum and Record of Appeal had lapsed, contravenes Section 42(14)(e) of the Tax Procedures Act, 2015, which precludes enforcement action once an Appeal has been lodged.
8. Counsel argued that that the respondent’s actions circumvented its statutory right to appeal, amounted to premature enforcement, and violated constitutional rights to access justice and equality before the law enshrined under Articles 48 & 27 of the Constitution, respectively. Ms Muna relied on the provisions of Section 32 of the Tax Appeals Tribunal Act, 2013, Rule 3 of the High Court Rules, and the decision in the case of Kombani Autoworks Limited v Commissioner of Domestic Taxes [2023] KETAT 988 (KLR), and submitted that although this Appeal was filed ten days after the subject Agency Notice, it was filed within the requisite statutory timelines, rendering the Agency Notice of no legal effect.
9. Mr. Isutsa, learned Counsel for the respondent relied on the provisions of Order 42 Rule 6 of the Civil Procedure Rules, 2010, and the Court of Appeal case of Butt v Rent Restriction Tribunal [1979] KECA 22 (KLR), and contended that the instant application was filed unreasonably late, following the issuance of Agency Notices on 20th December 2024 and that the appellant failed to serve its Notice of Appeal on the respondent as required under Section 32(2) of the Tax Appeals Tribunal Act. Counsel cited the case of Kenya Women Microfinance Ltd v Martha Wangari Kamau [2020] KEHC 4845 (KLR) and argued that the appellant has not shown any evidence of substantial loss beyond the ordinary consequence of paying taxes.
10. He cited the case of Gianfranco Manenthi & another v Africa Merchant Assurance Company Ltd [2019] KEHC 7586 (KLR) and stated that the appellant had failed to comply with the Court’s Order of 21st January 2025 requiring a deposit of Kshs.6,000,000/= as security. On the question of the Agency Notices, Mr. Isutsa contended that they were properly issued pursuant to Section 42(14)(e) of the Tax Procedures Act to recover taxes due, given that no valid Appeal had been served at the time. He submitted that the appellant seeks merely to delay the collection of taxes lawfully assessed and urged the Court to dismiss the instant application with costs.
ANALYSIS AND DETERMINATION.
11. Upon consideration of the application herein, the grounds on the face of it, and the affidavit filed in support thereof, as well as the replying affidavit by the respondent and the written submissions by Counsel for the parties, the issues that arise for determination are –
i) Whether the Agency Notice dated 20th December 2024 was properly issued upon the appellant;
ii) Whether an order for stay of execution should be granted; and
iii) Whether an order of prohibition should be granted.
Whether the Agency Notice dated 20th December 2024 was properly issued upon the appellant.
12. The appellant seeks a declaration to the effect that the Agency Notice dated 20th December 2024 be declared null and void and an order to quash the same, pursuant to the provisions of Section 42(14)(e) of the Tax Procedures Act, 2015. The appellant argued that the said Notice was issued prematurely, before the statutory period for filing a Memorandum and Record of Appeal against the Tax Appeals Tribunal’s Judgment had expired, thereby contravening the provisions of Section 42(14)(e) of the Tax Procedures Act, which bars enforcement action once an Appeal has been filed. The respondent on the other hand contended that the subject Agency Notice was validly issued under Section 5 of the KRA Act and Section 42 of the Tax Procedures Act to recover taxes due and asserted that the filing of a Notice of Appeal does not automatically suspend the enforcement of tax obligations.
13. The appellant was issued with a VAT assessment by the respondent on 24th November 2023, amounting to Kshs.11,678,587.66 for the period from 1st January to 31st October 2022. The appellant lodged an objection to the assessment, but the respondent upheld it on 25th March 2024, revising the total to Kshs.12,379,302.00, inclusive of penalties and interest. Aggrieved by that decision, the appellant appealed to the Tax Appeals Tribunal, which affirmed the assessment in its Judgment delivered on 22nd November 2024, prompting the appellant to subsequently file an Appeal with this Court.
14. It is also not disputed that the Appeal was filed within the timelines prescribed under Section 32 of the Tax Appeals Tribunal Act, and the Agency Notice dated 20th December 2024 was issued before the expiry of the statutory period for filing a Memorandum and Record of Appeal against the Tax Appeals Tribunal’s Judgment. Section 42(14)(e) of the Tax Procedures Act, which has been extensively cited by both parties, provides as follows -
The Commissioner shall not issue a Notice under this section unless -
a) the taxpayer or the non-resident person who is subject to tax in Kenya has defaulted in paying an instalment under section 33 (2);
b) the Commissioner has raised an assessment and the taxpayer or the non-resident person who is subject to tax in Kenya has not objected to or challenged the validity of the assessment within the prescribed period;
c) the taxpayer or the non-resident person who is subject to tax in Kenya has not Appealed against an assessment specified in an objection decision within the prescribed timelines;
d) the taxpayer or the non-resident person who is subject to tax in Kenya has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; or
e) the taxpayer has not Appealed against an assessment specified in a decision of the Tribunal or court. (Emphasis added).
15. Mr. Isutsa, learned Counsel for the respondent, submitted that Section 42(14)(e) of the Tax Procedures Act had been deleted by the New Finance Act. However, a review of the Finance Act, No. 4 of 2023, shows that Section 57 provides as follows-
Section 42 of the Tax Procedures Act, 2015, is amended by deleting subsection (14) and substituting therefor the following new subsection -
(14) The Commissioner shall not issue a Notice under this section unless -
a) the taxpayer has defaulted in paying an instalment under section 33(2);
b) the Commissioner has raised an assessment and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period;
c) the taxpayer has not Appealed against an assessment specified in an objection decision within the prescribed timelines;
d) the taxpayer has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; or
e) the taxpayer has not Appealed against an assessment specified in a decision of the Tribunal or court. (Emphasis added).
16. Upon review of the Finance Act, No. 9 of 2025, this Court notes that under Section 53, only subsections 14(a), (b), (c), and (d) were amended, leaving subsection 14(e) undisturbed. Consequently, I am not persuaded that Section 42(14)(e) of the Tax Procedures Act was deleted by the New Finance Act.
17. This Court finds that Section 42(14)(e) of the Tax Procedures Act bars and restricts the respondent from issuing demands, Notices, or taking any recovery measures before the statutory period for filing an appeal has expired or after a valid appeal has been filed. Therefore, having found that the Agency Notice dated 20th December 2024 was issued before the expiry of the statutory period for filing a Memorandum and Record of Appeal against the Tax Appeals Tribunal’s Judgment, I am satisfied that the subject Agency Notice was issued prematurely and in contravention of Section 42(14)(e) of the Tax Procedures Act.
18. Consequently, this Court finds that the Agency Notice dated 20th December 2024 was issued irregularly and is therefore null, void and of no legal effect.
19. Accordingly, as the order for stay of execution constitutes an alternative form of relief, the Court shall not consider it in light of the above finding.
Whether an order of prohibition should be granted.
20. The appellant also seeks an order restraining the respondent, its officers, agents, or servants from issuing any further Agency Notices or initiating any enforcement action in respect of the taxes that are the subject of this Appeal. The appellant contended that any such enforcement at this stage would cause irreparable harm, including disruption of its business operations and undue prejudice, which cannot be adequately compensated by an award of damages.
21. Although prohibition is a legal remedy, its effect is akin to that of an interlocutory injunction, in that it restrains a party from taking or continuing action that may prejudice the rights of another party pending the determination of substantive proceedings. Consequently, in determining whether an order of prohibition should issue, the Court is guided by principles analogous to those governing the grant of interlocutory injunctions as set out by the Court in Giella v Cassman Brown & Co. Ltd [1973] EA 358 as hereunder –
Firstly, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the Court is in doubt, it will decide an application on the balance of convenience.
22. Noting that appeals from the Tax Appeals Tribunal to the High Court are confined to questions of law, and that this Appeal requires the Court to inter alia, determine whether reimbursable payroll costs constitute a taxable supply under Section 5 of the VAT Act, 2013, in light of Section 13(5) of the same Act, this Court is satisfied that the appellant’s Appeal is arguable and warrants the appellant to being granted an order of prohibition.
23. Taking into consideration the provisions of Section 42(14)(e) of the Tax Procedures Act and the long and onerous process the appellant would face to recover any taxes collected should this Appeal succeed, this Court is persuaded that the appellant stands to suffer significant prejudice, including disruption of its business operations, if the orders being sought herein are not granted. To the contrary, the respondent would face minimal difficulty in recovering the taxes if the Appeal is unsuccessful.
24. On the totality of the evidence on record from the averments made, I am satisfied that the appellant has established a case to warrant being granted an order of prohibition against the respondent.
25. In the result, this Court finds that the instant application is merited and it is hereby allowed in the following terms -
i) A declaration is hereby issued that the Agency Notice dated 20th December 2024 is null, void and of no legal effect;
ii) An order quashing the said Notice is hereby granted;
iii) An order is hereby granted prohibiting the respondent, its officers, agents, or servants from issuing any further Agency Notices or instituting any enforcement action in respect of the taxes that are the subject matter of this Appeal, pending the determination of this Appeal; and
iv) Costs shall abide the outcome of the Appeal.
It is so ordered
DATED, SIGNED and DELIVERED at NAIROBI on this 5th day of December 2025. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:-
Ms Muna Abdullahi for the appellant/applicant
Mr. Isutsa for the respondent
Ms B. Wokabi – Court Assistant.