Kenya Revenue Authority VS Chemical Partners Kenya Limited Kenya Revenue Authority VS Chemical Partners Kenya Limited

INTRODUCTION

The appellant dissatisfied with the judgment of the Tribunal appealed to this court raising the following issues for determination:-

i) Whether the Appellant's decision to impose-import duty on the Respondent's product was a serious miscarriage of justice.
ii) Whether the Appellant's failure to take cognisance of the Respondent's manufacturer's Report and the evidence of the two expert chemical engineers was erroneous and thereby occasioned a serious miscarriage of justice to the Respondent.
iii)Whether the burden of proof of explaining why and how a tax decision was made lies with the Respondent.

The background of the appeal is as follows;-

BRIEF BACKGROUND

The Respondent sometimes in the year 2019 and in its normal course of business imported some raw materials vide the Mombasa Port. The Respondent classified the product Cerefak 106 under HS Codes 3824.90, a code that is import duty exempted and made a tax assessment/declaration at Kshs.295, 314.00 on other taxable elements i.e. VAT.
The Appellant requested for a sample of the Respondent's product on 2nd September 2019 for the purpose of conducting a laboratory analysis.
The Appellant after the analysis informed the Respondent vide the letter dated 23rd October 2019 that the product had been initially classified under the wrong classification tariff and therefore the tax was wrongfully assessed.
The initial assessment of the product was under HS Code 3824.90.90 which attracts 0% import duty fee whereas after the laboratory analysis the goods were classified under HS Code 3208.90.00 which attracts a 25% import duty.
The Appellant issued the Respondent with a demand letter on 2nd December 2020 for the said product citing a mis-declaration of tax and imposing extra revenue of Kshs. 535,257.00 on the Respondent.
The Respondent objected to the Appellant's decision dated 2nd December 2019 and maintained that the applicable duty is 0% and not 25% as demanded by the Appellant.
The Respondent further obtained a manufacturer's report confirming that indeed the second classification by the Customs and Border Control was erroneous.
The appellant delivered its ruling on 21st February, 2020 dismissing the appeal and upheld the previous Ruling of 2nd December, 2019.
The Appellant discovered the said ruling had been delivered and sent via post after the reopening of its offices in July 2020-due to the Covid-19 Pandemic.
The Appellant wrote to the Respondent asking for further information and explanation of how the said decision was arrived at and was referred to this Tribunal.
The Respondent presented two chemical engineers during the hearing as witnesses who testified that the Appellant's interpretation of the product and tax re-assessment was wrong.
The Honourable Tribunal rendered its judgement in favour of the Respondent hence the instant appeal.

APPELLANT'S CASE.
1. Whether the Appellant's decision to impose import duty on the
Appellant's product was a serious miscarriage of justice.
15. The Appellant submitted that the goods were imported and declared under Customs import entry number, 2019 MSA 7271490. On verification the product was found to be hazardous as specified in the material safety sheet data and on that basis destination sampling of the products was recommended and approved.

The product (THIXATROL P220X-MF) was tested in the Appellant's Testing and Inspection Centre and was found to be a chemical preparation containing polymeric organic compounds with typical amine and carbonyl functional groups dispersed in organic medium.
The Appellant submitted that-the-recommended tariff of HS Code 3208.90.00 which the Respondent's product lies therein whilst the declared HS Code 3824.90.90 as per the 2012 EAC which is not applicable has a 0% import duty. Therefore, the extra duties applicable is on 25% of the CIF value of the goods and this in turn affects the added value on VAT imports.
The classification of goods in the nomenclature is governed by the East Africa Community, Common External Tariff 2017 guided by the principles of General Interpretation Rules.
The Harmonized Tariff Schedule is a systematic classification or enumeration of all goods found in international trade along with international rules and interpretation. Since Kenya is a signatory to the World Custom Organization, parties are required to rely on the Harmonized Community Description and Coding System.
In the case of Republic Vs. Commissioner General & Another Ex-parte Awal Ltd [2008] eKLR the court stated as follows:-

"In the end I must conclude that looking at the material placed before me and the submissions tendered by learned counsels...the Respondents had the statutory duty-to-impose-duty-according to the tariff classification provided by law under the Customs and Excise Act. and under the Harmonized Community Description and Coding System provided by the World Custom Organization explanatory notes in which Kenya is a signatory."
2. Whether the Respondent's failure to take cognizance of the Appellant's manufacturer's Report and the evidence of the two expert chemical engineers was erroneous and thereby occasioned a serious miscarriage of justice to the Appellant.

The Appellant contended that all the procedures under EACCMA were fairly, legally and diligently followed by the Appellant and that there was no breach of procedure. There was lengthy communication between the parties whereby at every stage the Appellant explained to the Respondent the purpose of the information required and at no point did the Appellant make a decision without granting the Respondent an opportunity to respond and avail the necessary documents as evidenced by the lengthy documents filed by the Respondent.
The Appellant acted within the law as he requested for a sample of the Respondent's product on 2nd September 2019 for the purpose of conducting a laboratory analysis. The Appellant after the analysis-informed the Respondent vide the letter dated 23rd October 2019 that the product had been initially classified under the wrong classification tariff and therefore the tax was wrongfully assessed.
The initial assessment of the product was under HS Code 3824.90.90 which attracts 0% import duty fee whereas after the laboratory analysis the goods were classified under HS-Code-3208.90.00-which-attracts-a-25%-import duty.
The Appellant issued the Respondent with a demand letter on 2nd December 2020 for the said product citing a mis-declaration of tax and imposing extra revenue of Kshs. 535,257.00 on the Respondent. The Respondent objected to the appellant's decision dated 2nd December 2019 and maintained that the applicable duty is 0% and not 25% as demanded by the Appellant.
The Appellant delivered its ruling on 21st February, 2020 dismissing the appeal and upheld the previous ruling of 2nd December, 2019.

3. Whether the burden of proof of explaining why and how a tax-decision was made lies with the Respondent.
27. The Appellant submitted that the burden is on the taxpayer to prove that a tax decision is incorrect. That the Respondent failed to adequately prove that the tax assessment carried out by the Appellant was incorrect.
28. The Appellant further submits that the Respondent did not discharge its burden of proof in showing that the Appellant used extraneous considerations and documents other than those prescribed by the law and that the averments made by the Appellant at the hearing did not amount to evidence.
29. Section 56 of the Tax Appeals Tribunal Act states:
"In a proceeding before the Tribunal, the appellant has the burden of proving ;-
a) Where an appeal relates to an assessment, that the assessment is excessive; or
b) In any other case that the tax decision should not have been made or should have been made differently."
According to the appellant the respondent did not discharge the burden placed upon him on appeal to the Tax Appeals Tribunal.

The general rule of evidence is that, he who alleges must prove. In this regard, Section 107 of the Evidence Act, Cap 80, Laws of Kenya provides: -

"(1) Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.
(2) When a person is bound to prove the existence of any fact-it-is-said that the burden of proof lies on that person."

In the case of Sheria Sacco Society Limited V Commissioner of

Domestic Taxes [2019] eKLR Mary Kasango J held:
"The SACCO however needs to appreciate that what the Tribunal was dealing with was an appeal against the Commissioners' confirming notice that the SACCO had taxes to pay. When one appreciates that then the submissions of the Commissioner, under this head, are correct that the burden of proof lay on the SACCO. This is what is provided under Section 30(b) of the Tax Appeal Tribunal Act cap 40. That section provides:
In a proceeding before the Tribunal, the Appellant has the burden of proving a. Where an appeal relates to an assessment, that the assessment is excessive; or b. In any other case that the tax decision should not have been made or should have been made differently." The SACCO did not meet that burden of proof."

In the Australian case of Mulheim v Commissioner of Taxation [2013] FCAFC 115 the Full Federal Court of Australia (PFC) held:

“A taxpayer must satisfy the burden of proof to successfully challenge income tax assessments. The PFC held that it is not enough for a taxpayer to simply demonstrate that the assessment issued by the Commissioner is incorrect. Rather, the onus is on the taxpayer in proving that an assessment issued by the Commissioner is excessive can only be discharged by the taxpayer by adducing positive evidence which demonstrates the taxable income on which tax ought to have been levied. That onus requires the taxpayer to positively prove his or her 'actual taxable income' and in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer".

The Honourable Tribunal erred in determining that the Respondent properly classified-the-product as the said classification did not exist in the correct 2017 CET. As had been proved by the Appellant, the classification used by the Respondent had been overtaken.
The appellant further submitted that the classification used by the Appellant belonged to the 2012 CET handbook while the current is the 2017 CET Handbook. The Respondent imported its goods in 2019 and used an obsolete handbook to classify the goods and avoid paying any taxes.
The appellant further submitted that the classification by the Respondent was erroneous as the same did not exist in the CET 2017 and therefore the Tribunal misdirected itself in arriving at the decision.
The appellant went further to contend that the Honorable Tribunal did not address, make a determination or give directions on the other product namely 'Cerefak' which was part of the dispute between the parties and before the Honourable Tribunal.
The Appellant therefore urged this Honourable Court to make a determination on the issue.
In conclusion the appellant urged the court to allow the appeal and set aside the Tribunal's judgement and orders.

RESPONDENT'S SUBMISSIONS
36.The respondent submitted that the appellant sought the following orders from this court;-

That the Appeal hereon be allowed.
That the judgement of the Tax Appeals Tribunal delivered on 15th October 2021, in Tax Appeal No. 424 of 2021 determining the correct HS Code to be 3824.99.90 be set side.
That the Honourable Court do make a determination that the Appellant's decision to classify the Appellant's product as Thixatrol P220X and Cerefak 106 under HS Code 3208.90.00 which attracts 25% import duty and 16% VAT was correct.
That the Honourable Court do make a determination on the classification of CEREFAK.
That the costs of this Appeal be awarded to the Appellant.

37.The respondent submitted the factual matrix as hereunder;-
That sometimes in the year 2019, they imported seven (7) products, among them, Cerefak 106, Thixatrol and Michem emulsion.
38. On or about 1st July 2019, the Respondent made a tax declaration for the said products on the Appellant's Simba System under Customs entry 2019 ICD 7271490 and under the HS Code 3824.90.90 and among other HS Codes.
39. In July 2019, the Respondent's cargo was imported and the declaration was made. According to the respondent the HS Code 3824.90.90 was active and/or in use in the Appellant's Simba System.
40. The same has since been repealed and replaced with the East African Community Common External Tariff 2017 (hereinafter referred to as 'EAC/CET 2017')
41. Subsequently, the Appellant requested for samples of the Respondent's products for laboratory testing and analysis.
42. After the said analysis, on 23rd October 2019, the Appellant informed the Respondent that three of the abovementioned products being Thixatrol, Cerefak 106 and Michem emulsion had been classified under the wrong tariff code and therefore they had been undertaxed.
43. The Appellant indicated that Thixatrol, Cerefak ought to have been classified under HS Code 3208.90.00 while michem emulsion ought to have been classified under HS Code 3402.90.00 which
attracts 25% import duty.
44. The respondent submitted that, at the time the decision of the appellant was communicated there were no test results availed to the respondent.
45. During the initial assessment, the product had been classified under HS Code 3824.90.90 which attracts 0% import duty.
46. Aggrieved by the said decision, on 14th January 2020, the Respondent lodged an Appeal with the Appellant and on 21st February 2020, the Appellant rendered its decision upholding its initial declaration on one product, that is, Michem emulsion and classified it under HS Code
3824.90.90. The Appellant however, dismissed the Respondent's appeal on Thixatrol and Cerefak. As a result, the Respondent filed Tax Appeal Tribunal Case No. 424 of 2020.
47. The said suit was heard by way of written submissions and the tribunal delivered its judgement on 15th October 2021. The tribunal upheld the Respondent's classification and set aside the Appellant's tax decision dated 2nd December 2019 demanding the Respondent to pay 25% import duty of Kshs. 85,283.00 for the product Thixatrol and further held that it would not address the product namely Cerefak as the Appellant had not produced any documentary evidence or otherwise to the effect that the said product ought to be classified under HS Code 3208.90.00. As a result, the Appellant filed the present Appeal.
48.The respondent identified the following as the issues for determination;-

Whether or not the tribunal erred in law and in fact and misdirected itself when it found and held that the Appellant's classification of the Respondent's products under HS Code 3208.90.00 was erroneous.
Whether or not the tribunal erred in law and in fact and misdirected itself when it found and held that the Appellant had not taken into account the general interpretation rules in arriving at the classification under HS Code 3208.90.00.
Whether or not the tribunal erred in law and in fact and misdirected itself when it held that the HS Code 3824.90.90 was operational in the year 2019.
Whether or not the tribunal erred in law and in fact and misdirected itself when it failed to address itself on the product of Cerefak 106.
Whether or not the Appellant has discharged the burden of proof to be entitled to the Orders sought.

49. According to the respondent the appellants grounds of appeal nos. 1, 2, 3, & 5 could be combined and argued under the following head-
Whether or not the tribunal erred in law and in fact and/or misdirected itself when it found and held that the Appellant's classification of the Respondent's products under HS Code 3208.90.00 was erroneous.
According to the respondent, the tribunal was right in setting aside the Appellant's tax decision vide the letter dated 2nd December 2019 and in finding that the said classification was erroneous for the following reasons inter alia:
a) The thixatrol and Cerefak are wax pastes and not liquids
b) The said products are dispersions and not solutions made of a mixture of one or two dissolved ingredients as defined in Note 4 to Chapter 32 under both the East African Community Common External Tariff (hereinafter called EAC/CET 2012) (repealed) and the EAC/CET 2017.
c) The said waxes are dispersed in a carrier called a solvent for the purposes of
transportation.
d) They are merely ingredients or additives for the making of paints and coating systems and thus they are not finished products such as paints/vanishes which fall under Heading 32.08.
50. The respondent went further to set out the Composition of Thixatrol and Cerefak 106. In their submission the products to wit Cerefak 106 and Thixatrol are a copolymer wax and a polyamide wax respectively, dispersed in solvent carriers including xylene. This can be confirmed from the manufactures technical data sheet contained in pages 93-102 of the Record of Appeal.
51. That by virtue of the products being a wax, the appropriate HS Code Chapter 34 heading 3404. However, note 5 (d) to Chapter 34.04, of the EAC/CET 2012 specifies that the said chapter does not apply to waxes mixed with, dispersed in or dissolved in a liquid medium.
Waxes dispersed and/or dissolved in liquid medium are to be classified under HS Code 34.05, 38.09 and etc. The Respondent's products being copolymer and polymide waxes dispersed in solvents cannot fall under the code 34.05 which caters for finished products such as polishes and creams while 38.09 covers products such as dyes.
52. In the respondent’s view the applicable code then was HS Code 3824.90.90 which caters for chemical products and preparations of the chemical and allied industries including those of mixtures of natural products not elsewhere specified or included. According to him the position was also confirmed by the manufacturer who categorized the said products under the heading 3824.90.90.
53. The respondent went further to state that whereas the correct HS Code heading for coating systems/paints is 3208 or 3209 which attracts a duty rate of 25%, a component or raw material used in the making of product, it cannot be classified in the same heading as the final product.
According to the product data sheet availed by the manufacture namely, BYK and Elementis, Thixatrol is a rheological additive applied in a variety of solvent borne coating systems. It is specified to provide thixotropic and sag resistance along with increased anti-setting properties in the coating systems.
54. Further, the respondent argued that Cerefak is a copolymer wax for solvent-borne effect coating systems, especially for automotive coatings.
According to them the two products are therefore additives that only serve in the formulation of an end-use product namely coating systems, paints and etc. The products are not finished products under HS Code 3208.
55. The respondent went further to state that under the current EAC CET 2017, the two products are not paints, varnishes, enamel and/or lacquer and they cannot be categorized under HS Code 32.08 as alleged by the Appellant. The HS Code 32.08 under both the EAC/CET/2012 (repealed) and EAC/CET 2017 caters for the following products:
Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 4 to this Chapter.
Note 4 further provides as follows:
By virtue of Note 4, solutions (other than collodions) of the following compositions are to be classified in this heading: one or more of the products specified in headings 3902 to 3913 and any dissolved ingredients necessary for the manufacture of these products, such as accelerators, retarders, cross-linking agents etc.
56. The argument by the respondent is that it is imperative to note that HS 32.08 provides for finished products which are paints, varnishes, lacquers and enamels while Note 4 caters for a solution made of a mixture of one or two dissolved ingredients. This is before the said solution is dispersed or dissolved in a solvent or a mixture of solvents.
57. The Respondent's argument is that its products are wax products which are insoluble in the carrier. They are neither paints, varnishes, enamel and/or lacquers or solutions made of dissolved ingredients and they, cannot therefore fall under HS 32.08.
Further, that the Appellant has not adduced any evidence to effect that the said products contain accelerators, retarders, cross-linking agents or other dissolved substances to tie it with note 4 to chapter 32. They are merely special additives and nothing else.
58. The appellant went further to submit that the purported lab analysis dated 26th September 2019, on the product Thixatrol, the Appellant herein refers to Note 4 to Chapter 32 suggesting that the carrier in which Thixatrol which is a solvent, constitutes more than 50% of the solution. The purported analysis does not however disclose the percentage of the solvent it purportedly found in the said product.
According to the respondent there is no evidence before this Court and none was placed before the Tribunal to confirm that the solvent exceeded the purported 50% or that Thixatrol, which is a wax is a solution as defined under Note 4 to Chapter 32.
59. That further, the Amine and Carbonyl fimctional groups the Appellant found in the Thixatrol are monomers that link up to form the polymer or the polyamide wax, they do not constitute a solution. Other than that, the Appellant has not adduced any evidence that Thixatrol was found to contain accelerators, retarders, cross-linking agents or any other dissolved substance to tie
it with note 4 to Chapter 32 to form a formulation or solution as purported in their rulings.
60. In the respondent’s view if the purported test was done in a competent Government laboratory, and a 25% duty was determined pursuant to Note 4 to Chapter 32, then the Appellant ought to have identified in their analysis the purported components forming the solution.
61. The respondent argued that it is trite law that he who alleges must prove. The burden lay with the appellant herein to prove that the manufacturer's reports were both wrong and that the two products are paints, varnish, enamel, lacquer and/or solutions as defined under Note 4. According to the respondent the appellant failed to do so.
62. The respondent cited the case of Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR where the Court at par, 38-39 held as follows with regard to the burden of proof:
As i observed in PEA No #28 of 2020, "Burden of Proof" is a legal term used to assign evidentiary responsibilities to parties in litigation. The party that carries the burden of proof must produce evidence to meet a threshold or "standard" in order to prove their claim. If a party fails to meet their burden of proof, their claim will fail. "Burden of Proof" or the Tax Court is somewhat unique. At the Tax Court, a taxpayer is required to disprove an assessment by the Commissioner. In other words, a Tax payer challenging a tax assessment will need to collect and present evidence in order to disprove the Commissioner's position.
This is the basic principle. However, there are some situations where this responsibility or "onus" is reversed. The onus may also shift based on the stage of the proceedings and the actions taken by the parties,
The Supreme Court of Canada in Johnston v Minister of National Revenue [18] decided that the onus is on the taxpayer to "demolish the basic fact on which the taxation rested,"
Also, the Supreme Court of Canada provided guidance on this issue in Hickman Motors Lid, v Canada/191 that the onus is met when a Taxpayer makes out at least a prima facie case. Prima facie is another legal term that literally means "on its face." To prove a case "on its face" you must provide evidence that, unless rebutted, would prove your position.
According to the said decision, a prima facie case is made when the taxpayer can produce unchallenged and uncontradicted evidence. Once the taxpayer has made out a prima facie case to prove the facts, the onus then shifts to the Revenue Authority to rebut the prima facie case.
If the Revenue Authority cannot provide any evidence to prove their position, the taxpayer will succeed.
64. The Respondent maintains that he has indeed and beyond peradventure proved a prima facie case that the Appellant's decision to classify the Respondent's goods under the wrong HS Code thus imposing extra tax burden was indeed erroneous.
65. It is further submitted that the Respondent has gone a step further and adduced sufficient evidence to prove this fact.
66. According to the respondent the Appellant has failed to show and/or prove how the Tribunal erred in arriving at its decision.
67. On ground 4 of the memorandum of appeal as to Whether or not the tribunal erred in law and in fact and misdirected itself when it found and held that the Appellant had not taken into account the general interpretation rules in arriving at the classification under HS Code 3208.90.00, the respondent argued that under the EAC/CET 2012 (Repealed) and EAC/CET 2017, tariff
classification must be interpreted in line with the General Interpretations Rules for classification of goods (GIRS). Rule 1 of GIRS provides that: the titles of sections, chapters and sub-chapters are provided for ease of reference only; but for legal purposes classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided
such headings or Notes do not otherwise require, according to the following provisions.
68. The respondent urged this court to find that the tribunal was right in its findings and that the Appellant herein failed to indicate how it arrived at the tariff classification under HS Code 32.08.
68. In Republic V Commissioner of Customs & Ex Parte: Mulchand Ramji & Sons Limited [2010] eKLR, the Court at page 6 cited and was guided by the case of In keroche industries Itd v The revenue authority Misc. app. 743/06, in which Justice Nyamu cited BENNION ON STATUTORY INTERPRETATION-ACODE, 4th Ed at page 726-727 as follows;
"nevertheless, taxation is clearly 'penal' within this section of the code, and must not be enforced by the courts unless clearly imposed.... it is necessary to consider the legal analysis with the utmost precision so that the taxpayer shall not become liable to levies unless this is clearly and unequivocally the object of the statutory provision. The courts are reluctant to adopt a Construction permitting a person's tax liability to be fixed by administrative discretion,
In the instant case, the Respondent has not come out clearly why it decided to adopt 2106 as the code applicable yet the goods described at 2106 food preparations' are very different from those at 3004.90 Again at page 727 Bennion MA states as follows;
"-in a taxing Act, one has to look at what is clearly said. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."
69. On whether or not the tribunal erred in law and in fact and misdirected itself when it held that the HS Code 3824.90.90 was operational in the year 2019 the respondent maintained that the HS Code 3824.90.90 was still in use and active in the Appellant's Simba System, through which all tax declarations are done. This can be confirmed from the Respondent's tax declaration form dated 1st July 2019, which was printed from the said system when the Respondent made a declaration under HS Code 3824.90.90.
70. Further the respondent argued that in the year 2019, the Appellant was still using HS Code 3824.90.90.
71. On 14th January 2020, the Respondents herein objected to the Appellant's tax decision of 23rd October 2019, on the products Thixatrol, Cerefak and Michem Emulsion.
72. On 21st February 2020, the Appellant rendered its decision setting aside its initial tax declarations of Michem Emulsions under HS Code 3402.90.90 and classified the said product under HS Code 3824.90.90 under the EAC/CET 2012. The respondent submitted that by dint of that action by the appellant it confirmed that the HS Code was still in use at the time. The Appellant herein cannot, therefore, purport to approbate and reprobate the use of
the said tariff code.
73. Lastly, the respondent contended that that even in the event that the Appellant's products were to be classified under the current EAC/CET 2017, as demonstrated in issue I hereinabove, the same would be categorized under HS Code 3824.90.90 once again a duty- free category for mixtures not elsewhere specified or included but not under HS Code 32.08.
74. In answer to ground 7 of the memorandum of appeal on Whether or not the tribunal erred in law and in fact and misdirected itself when it failed to address itself on the product of Cerefak 106, the respondent submitted that the tribunal in its judgement dated 15th October 2021 held that:
"whereas the dispute initially appears to have been over the classification of two products namely Thixatrol and Cerefak, the laboratory analysis and bulk of the pleadings seem to focus only on Thixatrol. For this reason, the tribunal will only address itself on the classification of Thixatrol and assumes that the classification on Cerefak is not in dispute."
The position taken by the responfdent was that;-
a. The Respondent adduced sufficient evidence by way of manufacturing reports that Cerefak 106 is a wax paste dispersed in a carrier (solvent) and nothing else.
b. The Appellant herein neither provided a lab analysis nor any documentary evidence or otherwise to prove that the product Cerefak 106 is a paint, varnish, enamel or lacquer that can be categorized under heading 32.08.
c. The Appellant failed to discharge its burden of proof on this issue and failed to address the product Cerefak 106 in its submissions.
In view of the foregoing, the respondent urged this Court to find and hold that the product Cerefak is a wax paste and nothing else and the Appellant herein failed to adduce any evidence to controvert the Respondent's evidence.
75. The respondent cited the case of Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR in which the Court at Par 36 & 37 held as follows:
"...However, decided cases are in agreement that the burden of establishing the facts justifying the assessment of the penalty is on the Revenue Authority...The above being the law, the question is whether the Respondent established with evidence, that the tax assessment was erroneous or the tax was not due."
The Court went on to further state as follows at Par. 42,
"It is trite that an appeal court is bound by the trial court's findings of credibility, unless they were found to be affected by a material misdirection or to be clearly wrong. The appeal court will only reverse these findings where it is convinced that the findings are wrong. I am unable to find any misdirection by the TAT in regard to the finding of credibility or contradictions on the part of the Respondent."
76. The respondent concluded by urging this court to find that that the Appellant has not even attempted to show and/or prove how the Judgement of the Tax Appeals Tribunal delivered on 15 October 2021 in Tax Appeal No. 424 of 2021 and the orders therein were erroneous in fact and in law. The Respondent has on the other hand discharged its evidential and legal burden in arguing the instant appeal to the effect that it had no merit and should be dismissed with costs to the Respondent.
DETERMINATION

The appellants have made a compelling case demonstrating that the respondents in their import documents made misleading entries regarding the product they were importing into the country.
The objective of misdeclaration in this court’s view was basically to mislead the tax collector and evade payment of the correct duty on the goods.
The goods having been imported in 2019 it is not in doubt the effective and applicable common external tariff at the time was the 2017 tariff.
The 2017 had been repealed and as of the year 2021. The importation of the product happened in July 2019 thus with an amendment in 2017 the tariff applicable was not the 2012 one.
The respondent therefore relied on a non existent common external tariff with a view to evade duty. The Commissioners reassessment of the duty payable was thus merited,

The respondent was under duty to satisfy the Tribunal as well as this court that the duty as assessed by the Commisssioner was not due. In Kenya Revenue Authority v Maluki Kitili Mwendwa [2021] eKLR the Court at Par 36 & 37 held as follows:
"...However, decided cases are in agreement that the burden of establishing the facts justifying the assessment of the penalty is on the Revenue Authority...The above being the law, the question is whether the Respondent established with evidence, that the tax assessment was erroneous or the tax was not due."

The respondent was under duty to persuade this court that other than the fact that the code was still available in the Simba system, that it was the correct code for use on the product in issue. The respondent’s main argument is that since the code was still available in the system then they remained at liberty to use it. The argument cannot be sustainable since to do so would be akin to suggesting that even with the introduction of the 2017 tariff a party could still rely on the 2012 tariff since the Simba system allowed it. The duty to declare the product is a duty that is vested on the tax payer not the revenue collector. The duty to make a correct declaration of a product is thus incumbent upon the importer.
The effect of the respondent’s action was to deny the Kenya Revenue Authority the legitimate tax that was applicable to the product.
The appellant’s argument is that the Tribunal did not take into account that the 2012 Common External Tariff had become obsolete thus their decision was not based on legal foundation.
It is clear to this court that a non-existent Common External Tariff cannot be used as a basis of assessing the tax payable by an importer.
The Tribunal thus erred in its decision upholding the use of the 2012 Common External Tariff. The tribunal’s decision therefore can be allowed to stand in the circumstances.
The appellant also submitted that the classification of the product by the respondent was also misleading.
According to the appellant the HSC Code 3824.90.90 which the importer used in his importation documents was aimed at ensuring that the importer would not be taxed on the product since the said code attracted 0% (zero percent) import duty.
The appellant maintained that from their analysis of the product, the applicable HSC Code ought to have been HSC 3208.90.00 which classification would have allowed the commissioner to collect 25% import duty on the product.
The respondent in their submission have maintained that the classification applicable to the product they imported was code 3824.90.90 since the product was unfinished according to them.
The court notes that the commissioner in reclassifying the product did not do so arbitrarily. The product was subjected to analysis and that process of analysis has not been shown to have been faulty to result in vitiating the Commissioner’s re-assessment.
The tribunal should have addressed its mind to the issue the obsolete Common External Tariff used by respondents.
It is not the function of the Tribunal to decide what Tariff is applicable to a product. That remains the duty of the commissioner.
By entertaining the appeal by the respondent, the Tribunal should have simply inquired into the propriety of the decision of the Commissioner and if they were persuaded that the Commissioner was wrong in his decision, the proper thing to do would have been to return the matter to the commissioner for reclassification.
The limited role of a court reviewing the exercise of administrative discretion must constantly be remembered that it is not to substitute its own decision for that of the administrator by exercising discretion which the legislature has vested in the administrator. See Republic Vs. Public Procurement Administrative Review Board and 2 Others Ex parte Pelt Security Services Ltd [2018] eKLR in which Mativo J stated:-

“130. The discretionary nature of the Judicial Review remedies sought in this application means that even if a court finds a public body has acted wrongly, it does not have to grant any remedy. Examples where discretion will be exercised against an applicant may include where the applicant’s own conduct has been unmeritorious or unreasonable, for example where the applicant has unreasonably delayed in applying for judicial review, where the applicant has not acted in good faith, or where a remedy would impede the authority’s ability to deliver fair administration, or where the judge considers that an alternative remedy could have been pursued.

131. An administrative functionary that is vested by statute with the power to consider and make a decision is generally best equipped by the variety of its composition, by experience, and its access to sources of relevant information and expertise to make the right decision. The Court is slow to assume a discretion which has by statute been entrusted to another tribunal or functionary.”

If at all the respondents were dissatisfied with the appellants mode of analysis and determination of the nature a product, the answer to that would have been to subject the product to a joint analysis of the product at a mutually agreed Lab otherwise the Tribunal and this court would have absolutely no basis interfering with a scientific finding without the benefit of an expert opinion on the matter of product analysis.
In the circumstances the Tribunal having substituted its decision for that of the Commissioner erred in Law and therefore the judgment of the Tribunal is hereby set aside in its entirety and the decision of the Commissioner is upheld.
The appellant before the Tribunal having relied on an absolute Common External Tariff was not entitled to the prayers he sought before the tribunal.
Consequently, the decision of the Tribunal is set aside the Commissioner’s decision is upheld.
The appellant shall have the costs of this appeal.
It is so ordered.