Background
1. The appellant, Fortec Hardwares Limited is a limited liability company incorporated in Kenya involved in the importation and sale of hardware from India. The respondent carried out a Customs Post Clearance Desk Audit (PCA) for the appellant’s imports for the period January 2019 to December 2020 pursuant to Sections 235 and 236 of the EACCMA to establish compliance with Customs Laws and Regulations.
2. The PCA found that the appellant had nine declarations of different sizes for the period. It also found that consignments of Jute Hussein cloth imported by the appellant were grossly undervalued compared to identical goods from the same supplier. The respondent communicated the finding on 26th March 2021. The appellant responded on 6th April 2021 disagreeing.
3. On 13th April 2021, the respondent requested the appellant for supporting documentation to enable an in-depth review of the declared values. There was no reply by the appellant and on 20th April 2021, the respondent issued a reminder, which also elicited no response.
4. Consequently, on 23rd April 2021, the respondent issued a demand for Kshs. 8,589,213/- based on identical goods valuation method in line with the valuation agreement and section 122 as read with 4th Schedule of EACCMA, 2004.
5. Between 2nd June 2021 and 18th June, 2021, the appellant and the respondent exchanged numerous correspondence and held a meeting over the matter but they made no headway.
6. Eventually, on 13th July 2022 the appellant filed a notice of appeal before the Tax Appeals Tribunal (Tribunal) and later put in its memorandum of appeal and record of appeal. Through its judgment dated 5th May 2023, the Tribunal found that the appeal was invalid.
7. Aggrieved, the appellant instituted this appeal through a memorandum of appeal dated 17th May 2023, on the following grounds:
i. THAT Tax Appeal Tribunal erred in law and in fact by failing to note that the respondent violated sections 21 (1) 2(30 and 23 of the East African Community Management (Compliance Customs Enforcement) Regulation 2012.
ii. THAT the tax appeals tribunal erred in law and in fact by failing to note that the respondent violated sections 234,235 & 236 of EACCMA 2004.
iii. THAT the tax appeals tribunal erred in law and in fact by failing to note that the respondent violated the legal framework of the EAC Customs post clearance audit manual section 1.5.1.1,1.5.1.2, section 2.1.7 on transparency, section 3.1.3.6,3.2.2 notification to client and section 3.3.1 execution.
iv. THAT the tax appeals tribunal erred in law and in fact by failing to note that the respondent audited order forms instead of commercial invoices.
v. THAT the tax appeals tribunal erred in law and in fact by failing to note that the respondent audited order forms instead of commercial invoices.
vi. THAT the tax appeals tribunal erred in law and in fact by failing to consider the efficiency of granting the orders as prayed in the tax appeal case in the circumstances of the case.
vii. THAT the tax appeals tribunal erred in law and in fact by Ruling the way that it did.
8. The appellant prayed that its appeal be allowed and that the Tribunal judgment and orders be set aside and appropriate orders together with orders for cost be made.
9. In response, the respondent filed a statement of facts dated 6th November 2023 and written submissions dated 6th February 2024.
Analysis and Determination:
10. I have considered the record of appeal, the statement of facts, the parties’ respective submissions and authorities. The issue for determination is whether the appeal before the Tribunal was valid.
11. The appellant argued that the Tribunal erred by finding that its appeal was invalid. It also contended that following the issuance of the desk review findings communicated on 26th March 2021, on 30th March 2021, it furnished the requisite supporting documents. It also claimed that it did not receive the demand for the taxes due following the assessment after the uplift.
12. Thus, it argued that the respondent violated sections 234, 235 & 236 of EACCMA 2004, sections 21 (1) 2 (30) and 23 of the East African Community Management (Compliance Customs Enforcement) Regulation 2012 and the legal framework of the EAC Customs post clearance audit manual section 1.5.1.1,1.5.1.2, section 2.1.7 on transparency, section 3.1.3.6,3.2.2 notification to client and section 3.3.1 execution.
13. On the other hand, the respondent submitted that contrary to section 229 of EACCMA, the appellant neither responded nor acknowledged the demand. There was no review decision by the Commissioner on which the appellant could base its appeal as the appellant did not seek a review of the Commissioner’s decision as provided by EACCMA.
14. The respondent also submitted that the appellant’s appeal before the Tribunal was time-barred and that the appellant did not file a notice of appeal as required under sections 12 and 13 of the Tax Appeals Tribunal Act (TAT Act) as read together with section 52(1) of the Tax Procedures Act (TPA).
15. Section 52(1) of the TPA, provides that:
“A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act, 2013 (No. 40 of 2013).”
16. Section 13 (1) (b) of the TAT Act provides that a notice of appeal to the Tribunal shall be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner. Section 13(2) of the TAT Act provides that the Appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal of a memorandum of appeal, statement of facts and the tax decision.
17. Section 229 (1) and (2) of the EACCMA provides that:
“(1) A person directly affected by the decision or omission of the Commissioner or any other officer on matters relating to Customs shall within thirty days of the date of the decision or omission lodge an application for review of that decision or omission.
(2) The application referred to under subsection (1) shall be lodged with the Commissioner in writing stating the grounds upon which it is lodged.
(3) Where the Commissioner is satisfied that, owing to absence from the Partner State, sickness or other reasonable cause, the person affected by the decision or omission of the Commissioner was unable to lodge an application within the time specified in subsection (1), and there has been no unreasonable delay by the person in lodging the application, the Commissioner may accept the application lodged after the time specified in subsection (1).
(4) The Commissioner shall, within a period not exceeding thirty days of the receipt of the application under subsection (2) and any further information the Commissioner may require from the person lodging the application, communicate his or her decision in writing to the person lodging the application stating reasons for the decision.”
18. From the above, it is clear that a person aggrieved by the decision of the Commissioner or any officer is required to apply for review within 30 days after the decision.
19. The record shows that the respondent audited the appellant’s tax affairs and sent its demand for Kshs. 8,589,213/- on 23rd April 2021. The demand is at page 268 of the record of appeal. In the demand, the respondent mentioned that it was writing in reference to its earlier letter dated 13th April 2021 in which it had asked the appellant to provide transactional documents supporting its transaction values.
20. According to the respondent, the invoices attached to the declarations did not adequately demonstrate the transaction value, which necessitated the uplift of the declared FOB to USD 0.464 per yard of 45” 9Ox and USD 0.22 per yard of 45” 5Oz of Jute Hessian cloth, for all nine declarations imported by the appellant for the period between 31st January 2019 and 21st December 2020. Consequently, the respondent assessed additional duties, taxes and interests of Kshs. 8,589,213/- in accordance with sections 135 and 249 of EACCMA.
21. On 2nd June 2021, the respondent wrote to the appellant notifying it that it was required to pay the taxes demanded in the demand notice of 23rd April 2021. On 3rd June 2021, the appellant responded and informed the respondent that it had not received the demand. It however confirmed that it received a desk audit findings for Kshs. 8,589,213.00 dated 26th March 2021 which they responded to on 30th March 3031 and enclosed all transaction documents.
22. Through its letter of 5th June 2021, the appellant reiterated that it had not received the demand and requested the respondent to release the caveat put on the entry to allow the release of the consignment and avoid accruing demurrages.
23. The record also contains the minutes of a meeting held between the PCA team Tango and the appellant’s representatives on 9th June 2021. The minutes reflect that despite both the demand/ request for further documents and desk audit findings being sent through the appellant’s email, the appellant did not respond to the former within the 30 day timeline given. This led to the forwarding of the file to DMU.
24. Through a letter dated 10th June 2021, the appellant requested the respondent to assist its representative to settle the matter. In its response dated 16th June 2021, the respondent declined the request to present documents because the documents presented earlier were falsified as per PCA and asserted that the demand remained valid and payable immediately.
25. The appellant issued its reply dated 17th June 2021 to the effect that it could not obtain the documents requested through the letter dated 13th April 2021 citing that the timeline given before issuance of the demand of 23rd April 2021 was less than the 45 days required by law.
26. The appellant also asserted that it had been having issues with its operations due to lockdowns and curfews placed due to the Covid-19 pandemic. Thereafter, on 28th June 2021, the appellant issued a request to remove caveat on Entry No. 2021 MSA 7795508. The Appellant then lodged its Notice of Appeal before the Tribunal on 13th July 2022.
27. From the foregoing, it is clear that the appellant did not seek to have the tax demand of 23rd April 2021 reviewed within 30 days in accordance with section 229 (1) of the EACCMA. The appellant was only jolted into action by the respondent’s reminder of 2nd June 2021. In its response of 3rd June 2021, the appellant claimed that it did not receive the demand.
28. However, the appellant again did not produce any evidence that it applied for a review of the respondent’s decision within 30 days from 3rd June 2021 when it purportedly learnt of the demand. This raised the credibility of its subsequent explanation of 17th June 2021 that it was not able to respond to the demand because of the challenges occasioned due to the lockdown and curfews imposed due to the Covid-19 pandemic.
29. In the impugned judgment, the Tribunal noted that:
“134. The Tribunal notes that notwithstanding the Appellant’s assertion that it never received the demand letter dated 23rd April 2021, its letter of 17th June 2021 to the Respondent alludes to receiving the demand notice late and that it had 45 days to respond to the same. It is however, not clear to the Tribunal when the Appellant received the demand letter.
135. The Tribunal went further to review the Minutes of the meeting held on 9th June 2021 and established that it is not in dispute that the letter of findings dated 26th March 2021 was sent to the Appellant by email (fortecharwareltd@gmail.com) and that the same email was used to seek supporting documents to the Appellant’s response to the letter of findings. As per the Minutes, it is also not in dispute that the Appellant did not communicate further to the Respondent and after 30 days, the demand file was sent to the Debt Management Unit within Customs at KRA for enforcement measures to be undertaken.
136. The Tribunal further observes that, from the pleadings, the Appellant has neither confirmed the date when it received the demand notice of 23rd April 2021 nor attached an application for review of the same regardless of the date received.
138. …..
139. ….
140. The Tribunal notes that the Appellant only raised the issue of Covid-19 difficulties having affected its response to the Commissioner in its letter dated 17th June 2021 yet it had communicated with the Respondent prior to that date: specifically, on 3rd June 2021 and on 10th June 2021. It is further noteworthy that the letter of 10th June 2021, which was submitted after a meeting between the parties, held on 9th June 2021, neither made reference to the demand of 23rd April 2021 nor rebutted the contents of the demand letter yet it is clear to the Tribunal that by this time the Appellant was aware of the demand notice.
141. The Tribunal is also of the considered view that, if indeed the Appellant only became aware of the demand notice by the Respondent due to the Respondent’s letter dated 2nd June 2021 that referenced the same, it should have made an application for review within 30 days of this knowledge; which would be on or about 2nd July 2021. It is apparent to the Tribunal that an application for review was never lodged before the Appellant filed its Notice of Appeal to the Tribunal as none is attached to the Appellant’s pleadings.
142. …
144. The Tribunal notes that the Notice of Appeal lodged by the Appellant on 13th July 2022 makes reference to a decision by the Respondent indicated to have been made on 13th July 2021. A perusal of the documentation filed by both parties did not reveal such a decision. In any event, if such a decision existed, the Appellant would be in breach because the said decision was not attached to the Appeal documents.
144. As a result of the foregoing, the Tribunal finds that the Appellant did not make an application for review to the Commissioner and further, the instant Appeal was not backed by a review decision by the Commissioner.
145. The upshot of the above is that the Tribunal finds that the Appeal as filed has no legs to stand on and is therefore invalid.”
30. I align myself with these observations and agree with the Tribunal’s finding that there was no appealable decision before it. Under the TPA and the TAT Act, an appealable decision is defined as a decision made by the Commissioner of the Kenya Revenue Authority that a taxpayer can appeal against including tax assessments, tax refunds and penalties. By not adhering to the timeline given under section 229(1) of the EACCMA for review of a decision, there was no appealable decision.
31. In SBI International Holdings Ad (Kenya) Limited V Kenya Revenue Authority, [2024] KEHC 7236 (KLR) this Court observed that:
“The issue of timelines is integral to the jurisdiction of the Tribunal in entertaining an appeal from the Commissioner. Conversely, this Court’s jurisdiction to entertain an appeal is contingent upon there being an appeal emanating from the Tribunal. In the absence of such an appeal, this Court would lack jurisdiction, thereby breaching the doctrine of exhaustion.”
Disposition:
32. The upshot is that the appeal is dismissed for want of merit with no orders as to costs. The judgment of the Tribunal delivered on 5th May 2023 is hereby upheld.