REPUBLIC OF KENYA
IN TH HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
INCOME TAX APPEAL NO. E302, E235 &E249 OF 2024
COMMISSIONER OF LEGAL SERVICES &
BOARD COORDINATION………………………………….APPELLANT
VERSUS
KENAFRIC BEVERAGES AND BOTTLING
LIMITED…………………………………………………… RESPONDENT
(Being an appeal against the judgments delivered by the Tax Appeals Tribunal on the 20 th September, 2024, 1 st August 2024 respectively)
JUDGMENT
1. On 8 th March, 2023, in 302/24 KRA ( The Appellant) issued to the Respondent demand notice for the payment of Kshs.9,065,520.96 as excise duty on the basis that the Respondent ought not to have offset against excise duty payable for the period June, 2022 to January, 2023.
2. The Respondent through its agent PKF Taxation Services Limited disputed the demand notice.
3. The Respondent is described as a manufacturer and trader in non-alcoholic beverages of various kinds categorised under the Excise Duty Act to include bottled water, ready to drink carbonated soft drinks and energy drinks. The primary packaging material for the Respondent is bottles which are procured as Pre forms both locally and internationally as in put materials for the manufacture of the bottles. Upon procurement of the pre forms, the Respondent receives both IDL and RDL from KRA as all materials deemed to be raw/intermediate inputs for production receive this remission as per Section 37 and 38 of the Finance Act, 2019. According to the Respondent’s objection, the pre forms are not the actual packaging but undergo an intense process of manufacturing the bottle which is used as the packaging. This process is called the blowing process. It entails:
✔ Loading and sorting the preforms at the hopper machine.
✔ Subjecting the preforms to heating in an oven and blowing is accordance with the shape of the mould.
✔ Cooling and checking to strengthen the walls and bases of the bottles.
4. The Respondent explained that excise duty was paid at the point of entry and upon local purchase - this was offset every month against the excise duty payable for the month, on the listed good – the bottled water or carbonated drink. The Respondent relied on Section 2, 9(3), 11 and 14 of the Excise Duty Act, and Section 37, and 38 of the Finance Act, 2019.
5. The Respondent argued that the bottles used as the packaging material was manufactured at their factory and was not imported as a finished product – and the fact that KRA allowed the Respondent to enjoy remission on IDL, RDL was evidence that KRA was aware that the pre forms were indeed in put material and the Respondent was right in offsetting the excise duty paid against the excise duty charged on manufactured goods.
6. It was argued by the Respondent that it the bottled water and carbonated drinks cannot exist in a sellable state without being in bottles; that the process of manufacturing the bottles has the process described by Section 2 of the Excise Duty Act . Their ultimate request was for KRA to set aside their demand notice.
7. Vide a decision dated 22 nd June, 2023 – KRA rejected the objection application. KRA observed that the Respondent was in the business of manufacturing bottled water and beverages, that the Respondent had made claims of packaging material (bottles and preform bottles) contrary to the provisions of Section 14 of the Excise Duty Act
8. This is what happened in the other matters ITA 249 /2024 where the objection was dismissed and a sum of Ksh 10, 284,381 was demanded and ITA 235 of 2024 where it was kshs 1,491,188.88
9. In the matters the Commissioner pointed out the grounds of the objection to include that – the Respondent dealt in excisable goods and was allowed to offset the excise paid on the importation/local purchase of raw materials; that the preforms were raw materials for the manufacture of bottles used as carriers for the manufactured liquids; that the Respondent paid excise duty on manufactured trusted goods; the process of producing bottles from preforms fitted the definition of manufacture under Section 2 of the Excise Duty Act .
10. The Commissioner, using the definition of raw material from “Black Law Dictionary”(I am not certain which edition, or which page) to be a basic substance found in the natural modified or semi processed state, used as an input to a production process for subsequent modification/transformation into a finished good …. and relying on the decision of the Tax Appeals tribunal (TAT) Beiersdorf East Africa Ltd in Commissioner of Taxes – determined that preforms were not the final product – water and beverages were.
11. The Commissioner stated that though preforms undergo some manufacturing – they were not the Respondents final products. That the preforms were packaging materials, they were not raw materials, and the final product was ready for consumption even without the packaging material.
12. The commissioner rejected the objection and made a further demand notice. Due to interest and penalty it rose to Kshs.10,094,055/48.
13. The Respondent, aggrieved filed an appeal to the Tax Appeals Tribunal on 4 th August, 2023 on the grounds:
1) That the honourable Tribunal erred in law and in fact in setting aside the Appellant’s objection decision dated 22 nd June, 2023.
2) That the honourable Tribunal erred in law and in fact by taking into account extraneous matters and failed to take into account relevant matters in arriving at her decision.
3) That the honourable Tribunal erred in al and in fact failing to distinguish between a finished product from the packaging utilised to package the finished product as two distinct components.
4) That the honourable Tribunal erred in law and in fact in reaching the conclusion that perform bottles constituted an ingredient utilized in the manufacture/produce of water that is subsequently packaged through bottling.
5) That the honourable Tribunal misdirected itself, misapprehended and misconstrued the rules of construction in determining the meaning of the words ‘manufacture’.
6) That the honourable Tribunal erred in law and in fact in misapplying the provisions of Section 14 of the Excise Duty and double taxation of imported items that are subject to excise duty on import and are deployed as an ingredient in the manufacture of excisable goods: the input out principle of taxation.
7) That the honourable Tribunal misapplied the law and facts and therefore arrived at the wrong decision.
14. In the judgment dated 20 th September, 2024 the TAT allowed the appeal, and set aside the objection decision dated 22 nd June, 2023 – after making the finding that-
- This case was distinct from Beiersdorf case.
- That the Respondent did not use preforms to package its beverages but that it manufactured bottles from the preforms.
- That the tariff per schedule 1 under its code 2202.90.00 was the entry class that specifies the excisable product inclusive of the accompanying packaging; that other classes only specified the liquid as supported by Section 12 of the Excise Duty Act.
- That the Tribunal had taken the same position in TAT E909/2023 and E916/23 – involving both parties herein.
15. The Appellant was aggrieved and filed this appeal on the following grounds;
That the Tribunal erred in law and fact by; setting aside objection decision dated 22 nd June, 2023; taking into account extraneous matters, failing to take into account relevant matters in arriving at a decision; failing to distinguish between a finished product and packaging utilised to package the finished product; reaching the conclusion that preform bottles constitute an ingredient in the manufacture/production of water that is subsequently packaged through bottling; misapplied provision of Section 14 of the Excise Duty Act on double taxation of imported items that are subject to excise duty on import and are deployed as an ingredient in the manufacture of excisable goods; the input output principle of taxation, misdirected itself, misapprehended, misconstrued the issues of construction in determining the measure of the word – manufacture.
16. To support their cases parties filed statements of facts, submissions. They also highlighted the submissions. In doing so parties through counsel Ms Masai for the appellant and Ms Adunga for the respondent pointed out that the submissions were in respect of the three files ITA E235 of 2024, 249 of 2024 and 302 of 2024 because the parties are the same and the issues are the same.
17. Ms. Masai highlighted that the submissions stating that under s. 14 the Taxpayer can offset the cost of manufacture as long as one is licensed to manufacture. That in this case the taxpayer claimed excise on packaging material and the Commissioner refused to allow it. That the only thing the taxpayer did with the preforms was to blow air into them, and that the blowing of air did not amount to manufacture as per s. 2 of the Excise Duty Act . The appellant submitted that in Beiersdorf case the TAT stated that one needed to demonstrate an altering process for the packaging material to be considered raw material . That in this case the respondent would have to manufacture the bottles from scratch for them to fit into ‘raw materials’
18. For the respondent Ms. Adunga submitted in highlights that the issue of the licence was new and had not arisen before the Commissioners or in the Tribunal. That s. 14 Excise Duty Act did not provide for a manufacturing licence, and the respondent did not need a manufacturing licence.
19. In rejoinder Ms. Masai read s. 14 of the Excise Duty Act and added that it was a matter of law .
20. I have also carefully considered the written submissions filed by each party and the authorities cited therein.
21. Under Section 56 (2) of the Tax Procedures Act, an appeal to the High Court “shall be on a question of law only”.
22. It will be evident from the submissions that the recurring issues are:
1. Whether the Tribunal erred in its finding on the meaning of manufacture vis a vis the process the preforms undergo at the Respondent’s factory – and the attend meaning of raw material and finished goods.
2. Whether the Tribal erred in its application of Section 14 of the Excise Duty Act .
3. Whether there is a distinction between the facts of this case and the facts in Beiersdorf.
17. It is not in dispute that the Respondent’s business is the manufacture of bottled water and carbonated drinks – that is their finished goods – however, it is also not in dispute that this water, and these drinks are sellable when they are in the bottles.
18. In its submissions the appellant maintains that while packaging may be essential in the completion of formation of the product – it is not a raw material and the product is complete and ready for consumption even without the packaging material. That the Respondent is licensed to manufacture only bottled water and soft drinks – but has not demonstrated payment of excise duty on the preforms; that any industrialized process that is done to the packaging is immaterial to the finished product in question – water and beverages, and that the bottle is not part of the finished product. The Appellant also argues that the TAT has made 2 opposing determinations in this case and in the Beiersdorf case where it stated that
“The liquid content packaged in the glass bottles is the product that undergoes processing and may be packaged in different materials/containers” – creating confusion on the issue of excisable goods that are packaged.
19. The Appellant seeks that there is need for certainty and consistency and referred this court to Jasbir Singh Rai & 3 Others vs Tarlochan Singh & 4 others [2013] eKLR where the Supreme Court asserted the place of precedent in promoting inter alia predictability and fairness. The Appellant also cites Njoki Ndungu SCJ in Supreme Court Petition No. 18/2024 on the principle of stare decisis stating that the principle in Kenya is a Constitutional requirement whose aim is to enhance certainty and predictability in the legal system.
20. The Applicant argues that the mere fact that imported plastic bottles and locally sourced plastic bottles are charged excise duty does not qualify them for a set off in accounting for excise duty in a finished product.
21. The Respondent on its part submits that firstly – under part 1 of the first schedule of the Excise Duty Act – “bottled or similarly packaged waters and other non-alcoholic beverages not including fruit and vegetable juices” are listed as excisable goods. That these are listed under HS code 2209.90 whereby the finished good is the bottled water or carbonated drink – that under that code the finished good (water/carbonated/energy drink) would not be a finished good unless it is bottled. The Respondent reiterates its reliance on Section 2, 5, 14 of the Excise Duty Act.
22. The Respondent relies on the KRA Harmonized System Handbook for the EAC Customs and Administration; definition of preforms to be:
“An article not ready to direct use having the approximate shape and outline of the finished article or part and which can only be used, other than is exceptional cases, for completion into the finished article or part for example bottle preforms of plastics being intermediate products having tubular shapes with one closed end and one open end threaded to secure a screw type closure, the portion below the threaded end being intended to be expanded to a desired size and shape”.
23. It is submitted that the Appellant has treated imported preforms as raw materials under Section 37 and 28 of the Finance Act 2019 creating the expectation that preforms are raw materials.
24. The Respondent further relies on Section 12 (2) of the Excise Duty Act as read with the first schedule of the same Act.
25. Regarding the applicability of the Beiersdorf decision – it is submitted for the Respondent that there is a distinction and that the distinction was clearly set out – one is about the importation of glass bottles as a final product, whereas this case involves the importation or local procurement of preforms in their intermediate state for further manufacturing into the final product. That the Tribunal stated further that in the Beiersdorf case – the tat payer manufactured the roll-on liquid as it is final product – and imported the packaging material in its finished state – where in the Kenafric Case – the end product is known as “bottled water” and similarly packaged non-alcoholic beverages. The Tribunal stated further, for as long as what were imported were preforms – then they were raw materials. See Mjengo Limited vs Commissioner for Domestic taxes [2016] eKLR.
26. From the foregoing submissions it is clear that the issues are:
1. Whether there is confusion created by the decision of the TAT in Beiersdorf and in the Kenafric cases?
I have read the determination by the TAT in that case, and the Kenafric cases – cited herein – I agree with the Tribunal that the facts of in Beiersdorf and in the Kenafric cases regarding the finished product are not the same. The Respondent’s finished product is bottled water and other similarly packaged non-alcoholic beverages as indicated by the HS code 2202.90 of the Excise Duty Act. The Respondent does not import plastic bottles in their finished state to bottle its product which was the case in the Beiersdorf case where the bottle was imported in its finished state.
2. Whether preforms are raw materials?
This answers the question of manufacturing and finished product. My view is that the definition of raw materials must flow from the law. Section 2 of the Excise Duty Act states:-
The word manufacture includes:-
a. The production of excisable goods.
b. Any intermediate or uncompleted process in the production of excisable goods; or
c. ………………………
27. Having found that the finished product from Respondent is bottled product – the question is how it arrives at the bottled product. In this case – the preform comes, not as a packaging material but as material that requires some manufacturing in order to complete the Respondents finished product. It is not in doubt that the Respondent is licensed to manufacture water and other non-alcoholic beverages – but it is also clear that the preform as defined does not come as a packaging material as connoted by the Appellant but comes as a raw material – that the Respondent must take through a manufacturing process before it can become a packaging material.
28. Even though the water and the beverages manufactured by the Respondent “are ready for consumption without packaging” as submitted by the Appellant – they are not excisable in that form. According to the HS Code – they are only excisable when they become “bottled” – hence from that description – without them being bottled products they do not become excisable under the HS Code 2202.90.
29. In the circumstances the preforms become raw materials not for the water but for the finished excisable good that is the ‘bottled’ product under HS Code 2202.90. The process to bring the preforms to the state of the bottle required to bottle the product is itself a manufacturing process as envisaged by section 2 of the EXCISE DUTY ACT which recognises a ny intermediate or uncompleted process in the production of excisable goods. My understanding of the process is that there is an intermediary manufacturing process for the preforms required in the production of the excisable ‘bottled’ product.
30. The appellant needs to distinguish the connection between the excisable goods and the finished goods in this case. Preforms are raw materials in the production of the excisable goods.
3. Does Section 14 of the EXCISE DUTY ACT apply to the Respondent?
Section 14 of the Excise Duty Act states:
Relief for raw materials
(1) Where excise duty has been paid in respect of excisable goods imported into, or manufactured in Kenya by a licensed manufacturer and which have been used as raw materials in the manufacture of other excisable goods (hereinafter referred to as "finished goods"), the excise duty paid on the raw materials shall be offset against the excise duty payable on the finished goods
31. I have set out the facts of the case – they are settled. I have set out the definition of preforms, the meaning of manufacture, the meaning of the finished goods vis a vis excisable goods as applies to the Respondent, and the distinction between the Beiersdorf case and this case – I agree with the submissions of the respondent and it is my considered view that the Tribunal was right in its decision that Section 14 of the Excise Duty Act applies to the Respondent.
32. In the circumstances – I find and hold that
1. The definition of manufacture in s. 2(b) of the Excise Duty Act applies to the preforms used by the respondent
2. The preforms are not purchased as packaging materials but in an intermediate stage and are taken through a manufacturing process that is not merely blowing air.
3. The respondent’s finished goods is water and other not alcoholic beverages but it becomes excisable when bottled as per the HS 2209.90 as ‘bottled water’ or other beverage as defined
4. The s. 14 of the Excise Duty Act applies to the Respondent
33. I find each of the appeals to be without merit and is dismissed accordingly.
34. The decision of tribunal in each of the appeals be and is hereby upheld.
35. For avoidance of doubt and confusion, and considering the nature of the appeals the orders herein apply mutatis mutandis to ITA 235 & 249 of 2024
36. Orders accordingly.
37. Dated, signed and delivered vis CTS this 19 th December 2025
Mumbua T Matheka
Judge
CA Chrispol
Judgment ITA 302, 235 & 249 of 2024 Page 2 of 2
IN TH HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
INCOME TAX APPEAL NO. E302, E235 &E249 OF 2024
COMMISSIONER OF LEGAL SERVICES &
BOARD COORDINATION………………………………….APPELLANT
VERSUS
KENAFRIC BEVERAGES AND BOTTLING
LIMITED…………………………………………………… RESPONDENT
(Being an appeal against the judgments delivered by the Tax Appeals Tribunal on the 20 th September, 2024, 1 st August 2024 respectively)
JUDGMENT
1. On 8 th March, 2023, in 302/24 KRA ( The Appellant) issued to the Respondent demand notice for the payment of Kshs.9,065,520.96 as excise duty on the basis that the Respondent ought not to have offset against excise duty payable for the period June, 2022 to January, 2023.
2. The Respondent through its agent PKF Taxation Services Limited disputed the demand notice.
3. The Respondent is described as a manufacturer and trader in non-alcoholic beverages of various kinds categorised under the Excise Duty Act to include bottled water, ready to drink carbonated soft drinks and energy drinks. The primary packaging material for the Respondent is bottles which are procured as Pre forms both locally and internationally as in put materials for the manufacture of the bottles. Upon procurement of the pre forms, the Respondent receives both IDL and RDL from KRA as all materials deemed to be raw/intermediate inputs for production receive this remission as per Section 37 and 38 of the Finance Act, 2019. According to the Respondent’s objection, the pre forms are not the actual packaging but undergo an intense process of manufacturing the bottle which is used as the packaging. This process is called the blowing process. It entails:
✔ Loading and sorting the preforms at the hopper machine.
✔ Subjecting the preforms to heating in an oven and blowing is accordance with the shape of the mould.
✔ Cooling and checking to strengthen the walls and bases of the bottles.
4. The Respondent explained that excise duty was paid at the point of entry and upon local purchase - this was offset every month against the excise duty payable for the month, on the listed good – the bottled water or carbonated drink. The Respondent relied on Section 2, 9(3), 11 and 14 of the Excise Duty Act, and Section 37, and 38 of the Finance Act, 2019.
5. The Respondent argued that the bottles used as the packaging material was manufactured at their factory and was not imported as a finished product – and the fact that KRA allowed the Respondent to enjoy remission on IDL, RDL was evidence that KRA was aware that the pre forms were indeed in put material and the Respondent was right in offsetting the excise duty paid against the excise duty charged on manufactured goods.
6. It was argued by the Respondent that it the bottled water and carbonated drinks cannot exist in a sellable state without being in bottles; that the process of manufacturing the bottles has the process described by Section 2 of the Excise Duty Act . Their ultimate request was for KRA to set aside their demand notice.
7. Vide a decision dated 22 nd June, 2023 – KRA rejected the objection application. KRA observed that the Respondent was in the business of manufacturing bottled water and beverages, that the Respondent had made claims of packaging material (bottles and preform bottles) contrary to the provisions of Section 14 of the Excise Duty Act
8. This is what happened in the other matters ITA 249 /2024 where the objection was dismissed and a sum of Ksh 10, 284,381 was demanded and ITA 235 of 2024 where it was kshs 1,491,188.88
9. In the matters the Commissioner pointed out the grounds of the objection to include that – the Respondent dealt in excisable goods and was allowed to offset the excise paid on the importation/local purchase of raw materials; that the preforms were raw materials for the manufacture of bottles used as carriers for the manufactured liquids; that the Respondent paid excise duty on manufactured trusted goods; the process of producing bottles from preforms fitted the definition of manufacture under Section 2 of the Excise Duty Act .
10. The Commissioner, using the definition of raw material from “Black Law Dictionary”(I am not certain which edition, or which page) to be a basic substance found in the natural modified or semi processed state, used as an input to a production process for subsequent modification/transformation into a finished good …. and relying on the decision of the Tax Appeals tribunal (TAT) Beiersdorf East Africa Ltd in Commissioner of Taxes – determined that preforms were not the final product – water and beverages were.
11. The Commissioner stated that though preforms undergo some manufacturing – they were not the Respondents final products. That the preforms were packaging materials, they were not raw materials, and the final product was ready for consumption even without the packaging material.
12. The commissioner rejected the objection and made a further demand notice. Due to interest and penalty it rose to Kshs.10,094,055/48.
13. The Respondent, aggrieved filed an appeal to the Tax Appeals Tribunal on 4 th August, 2023 on the grounds:
1) That the honourable Tribunal erred in law and in fact in setting aside the Appellant’s objection decision dated 22 nd June, 2023.
2) That the honourable Tribunal erred in law and in fact by taking into account extraneous matters and failed to take into account relevant matters in arriving at her decision.
3) That the honourable Tribunal erred in al and in fact failing to distinguish between a finished product from the packaging utilised to package the finished product as two distinct components.
4) That the honourable Tribunal erred in law and in fact in reaching the conclusion that perform bottles constituted an ingredient utilized in the manufacture/produce of water that is subsequently packaged through bottling.
5) That the honourable Tribunal misdirected itself, misapprehended and misconstrued the rules of construction in determining the meaning of the words ‘manufacture’.
6) That the honourable Tribunal erred in law and in fact in misapplying the provisions of Section 14 of the Excise Duty and double taxation of imported items that are subject to excise duty on import and are deployed as an ingredient in the manufacture of excisable goods: the input out principle of taxation.
7) That the honourable Tribunal misapplied the law and facts and therefore arrived at the wrong decision.
14. In the judgment dated 20 th September, 2024 the TAT allowed the appeal, and set aside the objection decision dated 22 nd June, 2023 – after making the finding that-
- This case was distinct from Beiersdorf case.
- That the Respondent did not use preforms to package its beverages but that it manufactured bottles from the preforms.
- That the tariff per schedule 1 under its code 2202.90.00 was the entry class that specifies the excisable product inclusive of the accompanying packaging; that other classes only specified the liquid as supported by Section 12 of the Excise Duty Act.
- That the Tribunal had taken the same position in TAT E909/2023 and E916/23 – involving both parties herein.
15. The Appellant was aggrieved and filed this appeal on the following grounds;
That the Tribunal erred in law and fact by; setting aside objection decision dated 22 nd June, 2023; taking into account extraneous matters, failing to take into account relevant matters in arriving at a decision; failing to distinguish between a finished product and packaging utilised to package the finished product; reaching the conclusion that preform bottles constitute an ingredient in the manufacture/production of water that is subsequently packaged through bottling; misapplied provision of Section 14 of the Excise Duty Act on double taxation of imported items that are subject to excise duty on import and are deployed as an ingredient in the manufacture of excisable goods; the input output principle of taxation, misdirected itself, misapprehended, misconstrued the issues of construction in determining the measure of the word – manufacture.
16. To support their cases parties filed statements of facts, submissions. They also highlighted the submissions. In doing so parties through counsel Ms Masai for the appellant and Ms Adunga for the respondent pointed out that the submissions were in respect of the three files ITA E235 of 2024, 249 of 2024 and 302 of 2024 because the parties are the same and the issues are the same.
17. Ms. Masai highlighted that the submissions stating that under s. 14 the Taxpayer can offset the cost of manufacture as long as one is licensed to manufacture. That in this case the taxpayer claimed excise on packaging material and the Commissioner refused to allow it. That the only thing the taxpayer did with the preforms was to blow air into them, and that the blowing of air did not amount to manufacture as per s. 2 of the Excise Duty Act . The appellant submitted that in Beiersdorf case the TAT stated that one needed to demonstrate an altering process for the packaging material to be considered raw material . That in this case the respondent would have to manufacture the bottles from scratch for them to fit into ‘raw materials’
18. For the respondent Ms. Adunga submitted in highlights that the issue of the licence was new and had not arisen before the Commissioners or in the Tribunal. That s. 14 Excise Duty Act did not provide for a manufacturing licence, and the respondent did not need a manufacturing licence.
19. In rejoinder Ms. Masai read s. 14 of the Excise Duty Act and added that it was a matter of law .
20. I have also carefully considered the written submissions filed by each party and the authorities cited therein.
21. Under Section 56 (2) of the Tax Procedures Act, an appeal to the High Court “shall be on a question of law only”.
22. It will be evident from the submissions that the recurring issues are:
1. Whether the Tribunal erred in its finding on the meaning of manufacture vis a vis the process the preforms undergo at the Respondent’s factory – and the attend meaning of raw material and finished goods.
2. Whether the Tribal erred in its application of Section 14 of the Excise Duty Act .
3. Whether there is a distinction between the facts of this case and the facts in Beiersdorf.
17. It is not in dispute that the Respondent’s business is the manufacture of bottled water and carbonated drinks – that is their finished goods – however, it is also not in dispute that this water, and these drinks are sellable when they are in the bottles.
18. In its submissions the appellant maintains that while packaging may be essential in the completion of formation of the product – it is not a raw material and the product is complete and ready for consumption even without the packaging material. That the Respondent is licensed to manufacture only bottled water and soft drinks – but has not demonstrated payment of excise duty on the preforms; that any industrialized process that is done to the packaging is immaterial to the finished product in question – water and beverages, and that the bottle is not part of the finished product. The Appellant also argues that the TAT has made 2 opposing determinations in this case and in the Beiersdorf case where it stated that
“The liquid content packaged in the glass bottles is the product that undergoes processing and may be packaged in different materials/containers” – creating confusion on the issue of excisable goods that are packaged.
19. The Appellant seeks that there is need for certainty and consistency and referred this court to Jasbir Singh Rai & 3 Others vs Tarlochan Singh & 4 others [2013] eKLR where the Supreme Court asserted the place of precedent in promoting inter alia predictability and fairness. The Appellant also cites Njoki Ndungu SCJ in Supreme Court Petition No. 18/2024 on the principle of stare decisis stating that the principle in Kenya is a Constitutional requirement whose aim is to enhance certainty and predictability in the legal system.
20. The Applicant argues that the mere fact that imported plastic bottles and locally sourced plastic bottles are charged excise duty does not qualify them for a set off in accounting for excise duty in a finished product.
21. The Respondent on its part submits that firstly – under part 1 of the first schedule of the Excise Duty Act – “bottled or similarly packaged waters and other non-alcoholic beverages not including fruit and vegetable juices” are listed as excisable goods. That these are listed under HS code 2209.90 whereby the finished good is the bottled water or carbonated drink – that under that code the finished good (water/carbonated/energy drink) would not be a finished good unless it is bottled. The Respondent reiterates its reliance on Section 2, 5, 14 of the Excise Duty Act.
22. The Respondent relies on the KRA Harmonized System Handbook for the EAC Customs and Administration; definition of preforms to be:
“An article not ready to direct use having the approximate shape and outline of the finished article or part and which can only be used, other than is exceptional cases, for completion into the finished article or part for example bottle preforms of plastics being intermediate products having tubular shapes with one closed end and one open end threaded to secure a screw type closure, the portion below the threaded end being intended to be expanded to a desired size and shape”.
23. It is submitted that the Appellant has treated imported preforms as raw materials under Section 37 and 28 of the Finance Act 2019 creating the expectation that preforms are raw materials.
24. The Respondent further relies on Section 12 (2) of the Excise Duty Act as read with the first schedule of the same Act.
25. Regarding the applicability of the Beiersdorf decision – it is submitted for the Respondent that there is a distinction and that the distinction was clearly set out – one is about the importation of glass bottles as a final product, whereas this case involves the importation or local procurement of preforms in their intermediate state for further manufacturing into the final product. That the Tribunal stated further that in the Beiersdorf case – the tat payer manufactured the roll-on liquid as it is final product – and imported the packaging material in its finished state – where in the Kenafric Case – the end product is known as “bottled water” and similarly packaged non-alcoholic beverages. The Tribunal stated further, for as long as what were imported were preforms – then they were raw materials. See Mjengo Limited vs Commissioner for Domestic taxes [2016] eKLR.
26. From the foregoing submissions it is clear that the issues are:
1. Whether there is confusion created by the decision of the TAT in Beiersdorf and in the Kenafric cases?
I have read the determination by the TAT in that case, and the Kenafric cases – cited herein – I agree with the Tribunal that the facts of in Beiersdorf and in the Kenafric cases regarding the finished product are not the same. The Respondent’s finished product is bottled water and other similarly packaged non-alcoholic beverages as indicated by the HS code 2202.90 of the Excise Duty Act. The Respondent does not import plastic bottles in their finished state to bottle its product which was the case in the Beiersdorf case where the bottle was imported in its finished state.
2. Whether preforms are raw materials?
This answers the question of manufacturing and finished product. My view is that the definition of raw materials must flow from the law. Section 2 of the Excise Duty Act states:-
The word manufacture includes:-
a. The production of excisable goods.
b. Any intermediate or uncompleted process in the production of excisable goods; or
c. ………………………
27. Having found that the finished product from Respondent is bottled product – the question is how it arrives at the bottled product. In this case – the preform comes, not as a packaging material but as material that requires some manufacturing in order to complete the Respondents finished product. It is not in doubt that the Respondent is licensed to manufacture water and other non-alcoholic beverages – but it is also clear that the preform as defined does not come as a packaging material as connoted by the Appellant but comes as a raw material – that the Respondent must take through a manufacturing process before it can become a packaging material.
28. Even though the water and the beverages manufactured by the Respondent “are ready for consumption without packaging” as submitted by the Appellant – they are not excisable in that form. According to the HS Code – they are only excisable when they become “bottled” – hence from that description – without them being bottled products they do not become excisable under the HS Code 2202.90.
29. In the circumstances the preforms become raw materials not for the water but for the finished excisable good that is the ‘bottled’ product under HS Code 2202.90. The process to bring the preforms to the state of the bottle required to bottle the product is itself a manufacturing process as envisaged by section 2 of the EXCISE DUTY ACT which recognises a ny intermediate or uncompleted process in the production of excisable goods. My understanding of the process is that there is an intermediary manufacturing process for the preforms required in the production of the excisable ‘bottled’ product.
30. The appellant needs to distinguish the connection between the excisable goods and the finished goods in this case. Preforms are raw materials in the production of the excisable goods.
3. Does Section 14 of the EXCISE DUTY ACT apply to the Respondent?
Section 14 of the Excise Duty Act states:
Relief for raw materials
(1) Where excise duty has been paid in respect of excisable goods imported into, or manufactured in Kenya by a licensed manufacturer and which have been used as raw materials in the manufacture of other excisable goods (hereinafter referred to as "finished goods"), the excise duty paid on the raw materials shall be offset against the excise duty payable on the finished goods
31. I have set out the facts of the case – they are settled. I have set out the definition of preforms, the meaning of manufacture, the meaning of the finished goods vis a vis excisable goods as applies to the Respondent, and the distinction between the Beiersdorf case and this case – I agree with the submissions of the respondent and it is my considered view that the Tribunal was right in its decision that Section 14 of the Excise Duty Act applies to the Respondent.
32. In the circumstances – I find and hold that
1. The definition of manufacture in s. 2(b) of the Excise Duty Act applies to the preforms used by the respondent
2. The preforms are not purchased as packaging materials but in an intermediate stage and are taken through a manufacturing process that is not merely blowing air.
3. The respondent’s finished goods is water and other not alcoholic beverages but it becomes excisable when bottled as per the HS 2209.90 as ‘bottled water’ or other beverage as defined
4. The s. 14 of the Excise Duty Act applies to the Respondent
33. I find each of the appeals to be without merit and is dismissed accordingly.
34. The decision of tribunal in each of the appeals be and is hereby upheld.
35. For avoidance of doubt and confusion, and considering the nature of the appeals the orders herein apply mutatis mutandis to ITA 235 & 249 of 2024
36. Orders accordingly.
37. Dated, signed and delivered vis CTS this 19 th December 2025
Mumbua T Matheka
Judge
CA Chrispol
Judgment ITA 302, 235 & 249 of 2024 Page 2 of 2