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1. The Application that is before me for the determination is the one dated 8th August 2022 wherein the Applicants seek the following orders: -
a. This Honourable Court be pleased to issue an order of Certiorari to bring before this Honourable Court the decision by the 3rd Respondent contained in the Charge Sheet dated 19:07:2021 vide Criminal Case No. E802 of 2021 Republic vs Mohan Galot and London Distillers (K) Ltd for the purposes of being quashed.
b. This Honourable Court be pleased to issue an order of Prohibition, stopping the 1st Respondent from amending or substituting any further charges in the Charge Sheet dated 19:07:2021 vide Criminal Case No. E802 of 2021 Republic vs Mohan Galot and London Distillers (K) Ltd against the ex parte Applicants pending the hearing and determination of TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority before the Tax Appeals Tribunal and the exhaustion of any further subsequent proceedings attendant thereto under the Tax Procedure Act,2015.
c. This Honourable Court be pleased to issue an order of Prohibition, stopping the 1st Respondent from taking any other adverse action against the Exparte Applicants amounting to enforcement measures on the basis of the Assessment Notice dated 18:03:2021 and the objection decision dated 09:06:2021 pending the hearing and determination of TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority before the Tax Appeals Tribunal and the exhaustion of any further subsequent proceedings attendant thereto under the Tax Procedure Act,2015.
d. Any other Order that this Honourable Court may deem just to grant.
e. Costs
The Applicants Case;
2. The Application is supported by the supporting and the supplementary affidavits of 1st Applicant who is the Principal Shareholder and Chairman of the Board of Directors of the 2nd Applicant.
3. The 2nd Applicant is a limited liability Company incorporated in the Republic of Kenya in conformity with the provisions of the Companies Act.
4. On 21.07.2021 the Applicants herein were arraigned before the 4th Respondent in Criminal Case No. E802 of 2021 Republic vs Mohan Galot and London Distillers (K) Ltd Which was instituted by the 3rd Respondent before the 4th Respondent pursuant to investigations carried out by the officers of the 2nd Respondent
5. The support documents in the trial court according to the Applicant emanate from the Tax Assessment by the 1st Respondent contained in its letter dated 09.06.2021, which is now subject of the Appeal vide TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority.
6. It is the Applicants’ case that the proceedings before the Tax Appeals Tribunal challenged the 1st Respondent''s objection decision dated 09.06.2021 reiterating the tax assessment and computation of the alleged tax owed by the 2nd Applicant under cover of its Notice of Assessment vide letter dated 18.03.2021, a step which was expressly appreciated by the 1st Respondent whom in its letter advised as follows:
“You are however, reminded of your right of appeal as provided in Section 52 of the Tax Procedures Act, 2015 and Section 13 of the Tax Appeals Tribunal Act...”
7. The 2nd Applicant thereafter lodged with the Tax Appeals Tribunal, its Notice of Appeal and thereafter the said Appeal.
8. The 1st Respondent has been conducting investigations into the 2nd Applicant''s tax affairs for the years of 2015 up to 2019.
9. It is their case that by its letter dated 06.09.2020 the 1st Respondent sought to visit the 1st Applicant''s premises on a date to be mutually agreed to physically verify and take actual stocks of the items subject of the investigations.
10. By letter dated 13.10.2020 inter alia the Applicants argue that they responded to the 1st Respondent as follows:
“...Meanwhile you have expressed your intention to visit our client''s premises for further review and verification of facts on the ground. This is wholeheartedly welcome and could provide a more practical confirmation of facts...”
11. On 03.03.2021 the National Police Service summoned the Applicants to appear before one Peter M. Kiboro The Directorate of Criminal Investigations under the 3rd Respondent herein, who was seconded to the Kenya Revenue Authority the 1st Respondent.
12. On 05.03.2021 the 1st Applicant requested to be provided with the specific details to enable the Applicants to appear before the said Peter M. Kiboro as directed. One Joseph Mutesa responded in the following terms:
“Good after noon your latter has been received and your request to be finished with more information on investigation to enable you prepare for statement recording is noted.
However, we require you to attend as summoned, during the meeting should we note that you are not aware of the allegation, you will be informed of the basis of complain and you will have time to respond. As at now we will not give more details.
thank you
Regards
13. It is the Applicants case that the refusal by the writer to furnish them with the details of the investigations was not only unwarranted but against the spirit, intention, meaning, purport and effect of The Fair Administrative Actions Act, No. 4 of 2015 which is intended to give effect to the provisions of Article 47 of the Constitution.
14. It is the 1st Applicants case that it was only when he appeared before the said officers of the 2nd Respondents on 09.03.2021 that it was disclosed to him that the issue of the alleged tax evasion subject of the said Summons were the findings contained in preliminary investigation report.
15. It is the Applicants’ case that the matter was still at a preliminary stage as they were still awaiting for an indication from the investigating officers of the date when they would visit the 2nd Applicant’s distillery for the purposes of verification of the stocks and documents in its possession to enable the parties reconcile their contested positions as they had requested and therefore the issue of tax evasion could not have arisen.
16. It is argued that without even visiting the distillery of the 2nd Applicant for the purposes of verification of the facts and stock the 1st Respondent nonetheless proceeded to issue to the 2nd Applicant the assessment of its alleged tax liability.
17. This informed the filing of an objection against the 1st Respondent''s decision as required by the law and after the objection decision, an Appeal was instituted before the Tax Appeals Tribunal.
18. It is The Applicants case that prior to being arraigning in court on 21.07.2021 to face the charges subject matter thereof, the Applicants were never summoned by the 1st to 3rd Respondents to record a further statement on the basis of the said assessment and subsequent objection decision dated 09.06.2021 which formed the basis of the 18 counts preferred against the Applicants.
19. The criminal trial and the attendant process that is going on is predicated on the same statement that the 1st Applicant recorded on 22.03.2021.This is what the 1st to 3rd Respondents is relying on for the purposes of prosecuting the Applicants.
20. The applicants argue that the action by the 2nd Respondent to charge them without first recording the 1st Applicant’s further statement has impeded the Applicants right to be given notice of the nature and reasons for the decision to bring the criminal charges against them and an opportunity to be heard in contravention of Section 4 (3) of The Fair Administrative Actions Act.
21. They argue that the decision-making process by the 1st to 3rd Respondent in having them arraigned before the 4th Respondent before recording statement on the same amounted to condemning us unheard.
22. The Applicants argue that the decision making process adopted by the 1st Respondent that culminated in the issuance of the tax assessment of alleged tax due before visiting the 2nd Applicant''s premises for the purposes of the verification of the stock and other disputed items as per its letter dated 06.09.2020 violated their legitimate expectation that the decision to be made by the 1st Respondent would be arrived at after confirmation of facts and not on the basis of its whimsical decisions.
23. The decision-making process culminating in charging the Applicants had not crystallized. In any event the decision on which the criminal charges is based was to their knowledge actively before the Tax Appeals Tribunal vide TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority for determination on the amounts due if any, was therefore irrational, unfair, biased and unreasonable.
24. Section 7 (1) of The Fair Administrative Actions Act, No. 4 of 2015 to review an administrative action or decision, if the person who has made the decision has acted in excess of jurisdiction or power conferred under any written law and has been reasonably suspected of bias, as we were denied, as the persons to whom the administrative action or decision relates, a reasonable opportunity to state their case.
25. Section 49 of The National Police Service Act No.11A of 2011 provides that a police officer shall perform his duties and exercise his powers in a manner that is lawful, must respect the law and to the best of their capability, prevent and oppose any violations in the event of violation through abuses of any powers.
26. The 1st to 3rd Respondents are actuated by a desire to oppressing us the Applicants into acceding to demands by brandishing the sword of punishment under the criminal justice system and which is not a desire to punish on behalf of the public a crime that has actually not been committed.
27. It’s their case that though the 2nd Respondent has the right to investigate complaints made to him, the decision to prosecute is the sole prerogative of the 3rd Respondent.
28. The statement as recorded by the 1st Applicant formed the basis preliminary findings of its investigations and it is on the basis of the charge.
29. The decision by the 3rd Respondent to merely rubberstamp the decisions of the 1st and 2nd Respondents so as to have the Applicants charged unreasonable irrational.
30. It is their case therefore that in making the decision to institute the criminal proceedings, the 3rd Respondent has breached its duties under Article 157 (1) of the Constitution which requires him to always act judiciously and not in perpetuation of an unfair and malicious criminal complaint.
31. The Applicants believe that the 3rd Respondent ignored his primary duty of ensuring that the right to a fair trial cannot be limited thus raising the bar in the determination of the question on whether or not to prosecute by not making whimsical decisions and in violation of Articles 50(1) and 157(1) of the Constitution.
32. Article 157 of the Constitution commands the 3rd Respondent to ensure that the need to prevent and avoid abuse of the legal process through the criminal justice system is ensured, and to this end this Court has the jurisdiction to stop any process of prosecution that can lead to abuse of power.
33. They argue that this Honourable Court has the jurisdiction and powers to interrogate any question as to whether on the basis of the investigations by the 2nd Respondent and the impugned decision by the 3rd Respondent to prosecute us before the 4th Respondent is consistent with Article 157 of the Constitution , and where these expectations have not been met as in the instant case , terminate the proceedings so as to secure the ends of justice and restrain the abuse of its processes that may lead to harassment and persecution.
34. Pursuant to the leave that was granted by this Court on 19th February 2024, the Applicant filed a Supplementary Affidavit sworn on 28th February 2024 availing the Judgment delivered on 4th November 2022 by Tax Appeals Tribunal in Tax Appeal No. 408 of 2021: London Distillers (K) Limited v. Commissioner of Investigation and Enforcement (“the Appeal”).
35. It is argued that the objection decision of 9th June 2021 by the Respondent was as follows: -
“ You are however, reminded of your right of appeal as provided in Section 52 of the Tax Procedures Act, 2015 and Section 13 of the Tax Appeals Tribunal Act.”
36. The 2nd Applicant filed a Notice of Appeal dated 1st July 2021 in the Tax Appeals Tribunal (“the Tribunal”) in respect thereof and subsequently filed a Memorandum of Appeal dated 12th July 2021 which was filed in the Tribunal on 19th July 2021, pursuant to Section 52 of the Tax Procedures Act, 2015 and Section 13 of the Tax Appeals Tribunal Act.
37. During the pendency of the said Appeal 19th July 2021, the 2nd and 3rd Respondents at the behest of the 1st Respondent instituted criminal proceedings against the Applicants.
38. It is submitted that this was based on the Notice of Assessment dated 18th March 2021 and the objection decision of 9th June 2021 being Nairobi CMC Criminal Case No. 802 of 2021; Republic -vs- Mohan Galot & London Distillers (K) Limited (“the criminal case”). The Charge Sheet dated 19th July 2021 has many counts.
39. It is submitted that in the Judgement of the Tribunal, the objection decision dated 6th June 2021 by the 1st Respondent was set aside in totality, thereby upholding the 2nd Applicant’s objection dated 16th April 2021 to the effect that no taxes were due and owing to the 1st Respondent as per the Notice of Assessment dated 18th March 2021.
40. The said Judgement is in full force and effect as at the time of filing these submissions, since the same has not been set aside on appeal or otherwise.
41. The Applicants submit that the Tribunal held and concluded, inter alia, as follows:
“157. From an analysis of the two parties'' cases, it is, firstly, clear to the Tribunal that the Respondent undertook a visit to the Appellant''s premises after the assessment dated 18th March 2021, the objection decision dated 9th June 2021 and a notice of appeal to the Tribunal by the Appellant dated 1st July 2021 had been issued. This visit was supposed to physically verify issues surrounding bottles in a bid to get further clarification on the input-output analysis it had undertaken. To the extent that this visit happened after the assessment and the objection decision were issued, the question that arises is "what was the aim of the said visit at the time it was undertaken?"
158. A review by the Tribunal of the correspondences between the two parties has also established that the Appellant provided, at different times, various clarifications on the issues raised. Specifically, the Appellant provided an analysis of bankings on 28thJuly 2020 and on 30th July 2020. Further, on 4th July 2020, the Appellant provided a clarification on stamps from spirit and ready to drink product as well as an excise stamps clarification on bottles. Also, in the letter dated 4th July 2020, the Appellant provided a work in progress report on input-output analysis. Thereafter, in its letter of 18th August 2020 the Appellant submitted its clarifications on input-output analysis. Additionally, in its letter dated 13thOctober 2020, the Appellant responded to the issues raised by the Appellant''s letter of 6th September 2020 covering excise stamps reconciliation and input-output analysis of bottles.
159. The Tribunal has further observed that at no point does the Respondent refer to having reviewed actual production records maintained at the Appellant including the outcome of a review of flow meter readings or data from the Appellant''s factory''s production accounting system as installed under the supervision of the Respondent, its resident officer''s involvement in the exercise nor the outcome of a physical verification of bottles at the factory as had been agreed with the Appellant.
167. It is also not lost to the Tribunal that the Respondent’s witness on 27th July 2022, confirmed that in its investigative exercise, the Respondent’s investigative team neither verified production records including flow meter readings at the Appellant’s premises nor reviewed any records and/information maintained by its resident officer stationed at the Appellant’s factory.
172. It is the Tribunal''s view that the Respondent, in this Appeal, did not dispense with the above requirements of the Evidence Act in respect to tax evasion. Furthermore, the standard of proof in such cases is distinctively higher than the normal standard of the balance of probability and the Respondent did not attain or satisfy that proof. Under the circumstances therefore, the Tribunal noted that other than merely stating that there were issues relating to tax evasion involving the Appellant herein, the Respondent failed to prove it on the part of the Appellant to the satisfaction of the Tribunal.
178. In this regard, the Tribunal is unable to establish the basis of the Respondent’s computed variance of 168,088 litres of ready to drink product. Further, and as has been discussed in depth in the Appellant’s submissions, the Respondent did not respond to the Appellant’s explanations on the Appellant’s ready to drink stamps usage neither did the Respondent verify the same when it visited the Appellant’s premises.
180. Consequently, the Tribunal finds that the Respondent did not justify, either in law or otherwise, its Corporation Tax, Excise Duty and VAT assessment on the Appellant.
FINAL DECISION
181. In view of the foregoing and evidence before us, we find the Appeal to be merited.
Accordingly, the Tribunal makes the following orders: -
a) The Appeal be and is hereby allowed.
b) The Respondent’s decision dated 9th June 2021 be and is hereby set aside.”
42. They submit that it is trite that Judicial Review is concerned with the legality and fairness of the decision-making process undertaken by administrative bodies. The primary focus is whether the process leading to the impugned decision was lawful, procedurally fair, and within the jurisdiction of the decision-making body.
43. The Applicants submit that according to the findings of the Tribunal in the said Judgement, the following matters were clearly settled by the Tribunal: -
a. The 1st Respondent’s assessment process which led to the Notice of Assessment dated 18th March 2021 was procedurally flawed. In particular, the 1st Respondent failed to conduct a physical visit to the 2nd Applicants premises prior to issuing the assessment and the objection decision. This was contrary to the tenets and rules of Natural Justice and a clear breach of Article 47 of the Constitution on Fair Administrative Action.
b. The 1st Respondent did not consider the clarifications provided by the Applicants before issuing the Notice of Assessment dated 18thMarch 2021 and in making its objection decision on 9th June 2021. As such, the process of assessment was fundamentally defective and unfair and also contrary and inconsistent with the Rules of Natural Justice as well as Article 47 of the Constitution.
c. Due process was not followed in the 1st Respondent’s assessment that formed the basis of the criminal case against the Applicants. The criminal case proceedings are therefore unlawful and a breach of the Applicants’ Constitutional Rights. In any event, they ought not have been initiated during the pendency of the Appeal before the Tribunal.
44. Judicial Review is an administrative remedy that is meant to put checks and balances when an administrative body abuses its power against a party in dispute.
45. Reliance is placed in the case of Republic v Attorney General & 4 others Exparte Diamond Hashim Lalji and Ahmed Hasham Lalji [2014] eKLR, (pages 88-111 of the Applicants’ Bundle of Authorities see page 101); and held as follows: -
“... Judicial review Applications do not deal with the merits of the case but only with the process. In other words, judicial review only determines whether the decision makers had the jurisdiction, whether the persons affected by the decision were heard be/ore it was made and whether in making the decision the decision maker took into account relevant matters or did take into account irrelevant matters...”
46. They submit that Section 7(1) of the Fair Administrative Actions Act, No. 4 of 2015 to review an administrative action or decision, if the person who has made the decision has acted in excess of jurisdiction or power conferred to him under any written law and has been reasonably suspected of bias having denied the persons to whom the administrative actions or decision relates, a reasonable opportunity to state their case.
47. They submit that this is exactly what the 1st Respondent did before issue the Notice of Assessment dated 18thMarch 2021 and the objection decision of 9th June 2021.
48. They submit that the immediate effect of the 1st Respondent’s flawed assessment process as determined by the Tribunal, is that the alleged tax liability upon which the criminal case is based had not been properly and accurately established at the time the charges were preferred. A procedurally flawed and defective administrative action, such as the 1stRespondent’s tax assessment and objection decision renders the criminal case null and void and therefore invalid.
49. In Patrick Macharia Nderitu v Director of CID & another [2017] KEHC 4275 (KLR) (pages 1-9 of the Applicants’ Bundle of Authorities see page 6); the Court (Aburili J.) held as follows: -
“As correctly discussed by Honourable Justice Odunga J in JR 130/2013, in order for an Application for judicial review to succeed, the Applicant has to show that the decision or act complained of is tainted with illegality, irrationality or procedural impropriety. Illegality is when the decision-making authority commits an error of law in the process of taking or making the act, the subject of the complaint.
Acting without jurisdiction or ultra vires, or contrary to the provisions of a law or its principles are instances of illegality. Irrationality is where there is such gross unreasonableness in the decision taken or act done, that no reasonable authority addressing itself to the facts before it, would have made such a decision. Such a decision is usually in defiance of logic and acceptable moral standard. Procedural impropriety is where there is failure to act fairly on the part of the decision-making authority in the process of taking a decision.” Emphasis added.
50. In Republic v Kenya Revenue Authority (KRA) & 4 others; New Flamingo Hardware & Paints Limited & 22nd others (Ex Parte) [2020] KEHC 10284 (KLR) (pages 10-25 of the Applicants’ Bundle of Authorities see page 22); the Court (W. Korir J. as he then was) held as follows:
“In Republic v Public Procurement Administrative Review Board & 2 others [2019] eKLR; Nairobi HC Misc. Civil Application No. 187 of 2018 it was postulated that:
“29. Procedural impropriety generally encompasses two things: procedural ultra vires, where administrative decisions are challenged because a decision-maker has overlooked or failed to properly observe statutory procedural requirements; and common law rules of natural justice and fairness. Lord Diplock noted that "failure by an administrative tribunal to observe procedural rules that are expressly laid down in the legislative instrument by which its jurisdiction is conferred, even where such failure does not involve any denial of natural justice," is a form of procedural impropriety….
... In a broader sense the ultra vires principle has been used as the vehicle through which to impose a number of constraints on the way in which the power given to the agency has been exercised: it must comply with rules of fair procedure, it must exercise its discretion to attain proper and not improper purposes, it must not act unreasonably etc. The ultra vires principle thus conceived provided both the basis for judicial intervention and also established its limits.”
An ultra vires action is one which is taken either when the administrator does not have the capacity to make a particular decision or take a particular action; or where the administrator has the capacity but fails to follow the laid down procedure for making such a decision or action. KRA was established with the mandate of assessing and collecting revenue, and the administrative enforcement of the laws relating to revenue. Even though KRA has the authority to collect taxes, including unpaid taxes, the exercise of such powers must still be done according to the law.
The Respondents (KRA) in exercising their authority failed to follow the proper procedure before making demands for unpaid taxes. By failing to provide the Applicants with amended tax assessments, failing to give them not less than 30 days to respond, and not informing them of their option for objecting to the proposed actions, the Respondents acted ultra vires and failed to follow the due process. Emphasis Added.
51. In Skydive Diani Club v Ministry of Interior and Coordination of National Government & another [2019] eKLR (pages 26-33 of the Applicants’ Bundle of Authorities see page 31); the Court (Ogembo J.) held as follows: -
“This Court associates itself with the Canadian Supreme Court decision in Baker vs. Canada (Minister of Citizenship & Immigration) 2 S.C.R. 817 6 where it was held:
“The values underlying the duty of procedural fairness relate to the principle that the individual or individuals affected should have the opportunity to present their case fully and fairly, and have decision affecting their rights, interests, or privileges made using a fair, impartial and open process, appropriate to the statutory, institutional and social context of the decisions.” Emphasis added.
52. Similarly, Sergon J. in Ali v Mohammed & 3 others [2022] KEHC 13769 (KLR) (pages 34-39 of the Applicants’ Bundle of Authorities see page 38); the Court (Sergon J.) observed as follows:
“… If indeed the principles of natural justice are violated in respect of any decision, it is indeed immaterial whether the same decision would have been arrived at in the absence of the departure from essential principle of justice. The decision must be declared to be no decision…It is paramount at this juncture that this court establishes the ingredients and/or components of natural justice. The principles of natural justice concern procedural fairness and ensure a fair decision is reached by an objective decision maker. Maintaining procedural fairness protects the rights of individuals and enhances public confidence in the process. The ingredients of fairness or natural justice that must guide all administrative decisions are, firstly, that a person must be allowed an adequate opportunity to present their case where certain interests and rights may be adversely affected by a decision-maker; secondly, that no one ought to be judge in his or her case and this is the requirement that the deciding authority must be unbiased when according the hearing or making the decision; and thirdly, that an administrative decision must be based upon logical proof or evidence material”. Emphasis added.
53. The criminal case is predicated upon the Notice of Assessment dated 18thMarch 2021 and the objection decision of 9th June 2021 by the 1st Respondent. The Tribunal in its Judgement aforesaid set aside the said objection decision and indeed the assessment. The Judgement of the Tribunal is in full force and effect since the same has not been set aside on Appeal or otherwise. Most importantly according to them the Tribunal in its Judgement held as follows regarding the taxes that are in issue in the criminal case:
“180. Consequently, the Tribunal finds that the Respondent did not justify, either in law or otherwise, its Corporation Tax, Excise Duty and VAT assessment on the Appellant. “
54. They reiterate that the process leading to Notice of Assessment dated 18th March 2021 and the objection decision dated 9th June 2021 by the 1stRespondent was flawed, unfair, defective and inconsistent with the Rules of Natural Justice and contrary to Article 47 of the Constitution.
55. In Republic v Director of Public Prosecutions & 2 others; Kinyua (Exparte Applicant); Atta Kenya Limited & another (Interested Parties) [2024] KEHC 13596 (KLR), (pages 40-54 of the Applicants’ Bundle of Authorities see page 47); the Court (Sewe J.) observed as follows:
“The same position was reiterated by the Court of Appeal in Joram Mwenda Guantai v The Chief Magistrate, Nairobi Civil Appeal No. 228 of 2003 [2007] 2 EA 170, as follows:
“… Equally so, the High Court has inherent jurisdiction to grant an order of prohibition to a person charged before a subordinate court and considers himself to be a victim of oppression. If the prosecution amounts to an abuse of the process of the court and is oppressive and vexatious, the Judge has the power to intervene and the High Court has the inherent power and the duty to secure fair treatment for all persons who are brought before the court or to a subordinate court and to prevent an abuse of the process of the court.”
As for Certiorari, the Court of Appeal held as follows in Kenya National Examination Council v Republic, Ex Parte Geoffrey Gathenji Njoroge & 9 others (supra):
“…Only an order of Certiorari can quash a decision already made and an order of certiorari will issue if the decision is made without or in excess of jurisdiction, or where the rules of natural justice are not complied with or for such like reasons…”
56. The 3rd Respondent is bound by Article 157(11) of the Constitution which states that:
“In exercising the powers conferred by this Article, the Director of Public Prosecutions [DPP] shall have regard to the public interest, the interests of the administration of justice and the need to prevent and avoid abuse of the legal process."(Emphasis Added)
57. In the case of Douglas
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1. The Application that is before me for the determination is the one dated 8th August 2022 wherein the Applicants seek the following orders: -
a. This Honourable Court be pleased to issue an order of Certiorari to bring before this Honourable Court the decision by the 3rd Respondent contained in the Charge Sheet dated 19:07:2021 vide Criminal Case No. E802 of 2021 Republic vs Mohan Galot and London Distillers (K) Ltd for the purposes of being quashed.
b. This Honourable Court be pleased to issue an order of Prohibition, stopping the 1st Respondent from amending or substituting any further charges in the Charge Sheet dated 19:07:2021 vide Criminal Case No. E802 of 2021 Republic vs Mohan Galot and London Distillers (K) Ltd against the ex parte Applicants pending the hearing and determination of TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority before the Tax Appeals Tribunal and the exhaustion of any further subsequent proceedings attendant thereto under the Tax Procedure Act,2015.
c. This Honourable Court be pleased to issue an order of Prohibition, stopping the 1st Respondent from taking any other adverse action against the Exparte Applicants amounting to enforcement measures on the basis of the Assessment Notice dated 18:03:2021 and the objection decision dated 09:06:2021 pending the hearing and determination of TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority before the Tax Appeals Tribunal and the exhaustion of any further subsequent proceedings attendant thereto under the Tax Procedure Act,2015.
d. Any other Order that this Honourable Court may deem just to grant.
e. Costs
The Applicants Case;
2. The Application is supported by the supporting and the supplementary affidavits of 1st Applicant who is the Principal Shareholder and Chairman of the Board of Directors of the 2nd Applicant.
3. The 2nd Applicant is a limited liability Company incorporated in the Republic of Kenya in conformity with the provisions of the Companies Act.
4. On 21.07.2021 the Applicants herein were arraigned before the 4th Respondent in Criminal Case No. E802 of 2021 Republic vs Mohan Galot and London Distillers (K) Ltd Which was instituted by the 3rd Respondent before the 4th Respondent pursuant to investigations carried out by the officers of the 2nd Respondent
5. The support documents in the trial court according to the Applicant emanate from the Tax Assessment by the 1st Respondent contained in its letter dated 09.06.2021, which is now subject of the Appeal vide TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority.
6. It is the Applicants’ case that the proceedings before the Tax Appeals Tribunal challenged the 1st Respondent''s objection decision dated 09.06.2021 reiterating the tax assessment and computation of the alleged tax owed by the 2nd Applicant under cover of its Notice of Assessment vide letter dated 18.03.2021, a step which was expressly appreciated by the 1st Respondent whom in its letter advised as follows:
“You are however, reminded of your right of appeal as provided in Section 52 of the Tax Procedures Act, 2015 and Section 13 of the Tax Appeals Tribunal Act...”
7. The 2nd Applicant thereafter lodged with the Tax Appeals Tribunal, its Notice of Appeal and thereafter the said Appeal.
8. The 1st Respondent has been conducting investigations into the 2nd Applicant''s tax affairs for the years of 2015 up to 2019.
9. It is their case that by its letter dated 06.09.2020 the 1st Respondent sought to visit the 1st Applicant''s premises on a date to be mutually agreed to physically verify and take actual stocks of the items subject of the investigations.
10. By letter dated 13.10.2020 inter alia the Applicants argue that they responded to the 1st Respondent as follows:
“...Meanwhile you have expressed your intention to visit our client''s premises for further review and verification of facts on the ground. This is wholeheartedly welcome and could provide a more practical confirmation of facts...”
11. On 03.03.2021 the National Police Service summoned the Applicants to appear before one Peter M. Kiboro The Directorate of Criminal Investigations under the 3rd Respondent herein, who was seconded to the Kenya Revenue Authority the 1st Respondent.
12. On 05.03.2021 the 1st Applicant requested to be provided with the specific details to enable the Applicants to appear before the said Peter M. Kiboro as directed. One Joseph Mutesa responded in the following terms:
“Good after noon your latter has been received and your request to be finished with more information on investigation to enable you prepare for statement recording is noted.
However, we require you to attend as summoned, during the meeting should we note that you are not aware of the allegation, you will be informed of the basis of complain and you will have time to respond. As at now we will not give more details.
thank you
Regards
13. It is the Applicants case that the refusal by the writer to furnish them with the details of the investigations was not only unwarranted but against the spirit, intention, meaning, purport and effect of The Fair Administrative Actions Act, No. 4 of 2015 which is intended to give effect to the provisions of Article 47 of the Constitution.
14. It is the 1st Applicants case that it was only when he appeared before the said officers of the 2nd Respondents on 09.03.2021 that it was disclosed to him that the issue of the alleged tax evasion subject of the said Summons were the findings contained in preliminary investigation report.
15. It is the Applicants’ case that the matter was still at a preliminary stage as they were still awaiting for an indication from the investigating officers of the date when they would visit the 2nd Applicant’s distillery for the purposes of verification of the stocks and documents in its possession to enable the parties reconcile their contested positions as they had requested and therefore the issue of tax evasion could not have arisen.
16. It is argued that without even visiting the distillery of the 2nd Applicant for the purposes of verification of the facts and stock the 1st Respondent nonetheless proceeded to issue to the 2nd Applicant the assessment of its alleged tax liability.
17. This informed the filing of an objection against the 1st Respondent''s decision as required by the law and after the objection decision, an Appeal was instituted before the Tax Appeals Tribunal.
18. It is The Applicants case that prior to being arraigning in court on 21.07.2021 to face the charges subject matter thereof, the Applicants were never summoned by the 1st to 3rd Respondents to record a further statement on the basis of the said assessment and subsequent objection decision dated 09.06.2021 which formed the basis of the 18 counts preferred against the Applicants.
19. The criminal trial and the attendant process that is going on is predicated on the same statement that the 1st Applicant recorded on 22.03.2021.This is what the 1st to 3rd Respondents is relying on for the purposes of prosecuting the Applicants.
20. The applicants argue that the action by the 2nd Respondent to charge them without first recording the 1st Applicant’s further statement has impeded the Applicants right to be given notice of the nature and reasons for the decision to bring the criminal charges against them and an opportunity to be heard in contravention of Section 4 (3) of The Fair Administrative Actions Act.
21. They argue that the decision-making process by the 1st to 3rd Respondent in having them arraigned before the 4th Respondent before recording statement on the same amounted to condemning us unheard.
22. The Applicants argue that the decision making process adopted by the 1st Respondent that culminated in the issuance of the tax assessment of alleged tax due before visiting the 2nd Applicant''s premises for the purposes of the verification of the stock and other disputed items as per its letter dated 06.09.2020 violated their legitimate expectation that the decision to be made by the 1st Respondent would be arrived at after confirmation of facts and not on the basis of its whimsical decisions.
23. The decision-making process culminating in charging the Applicants had not crystallized. In any event the decision on which the criminal charges is based was to their knowledge actively before the Tax Appeals Tribunal vide TAT No. 408 of 2021 London Distillers (K) Ltd vs The Commissioner of Investigation and Enforcement of the Kenya Revenue Authority for determination on the amounts due if any, was therefore irrational, unfair, biased and unreasonable.
24. Section 7 (1) of The Fair Administrative Actions Act, No. 4 of 2015 to review an administrative action or decision, if the person who has made the decision has acted in excess of jurisdiction or power conferred under any written law and has been reasonably suspected of bias, as we were denied, as the persons to whom the administrative action or decision relates, a reasonable opportunity to state their case.
25. Section 49 of The National Police Service Act No.11A of 2011 provides that a police officer shall perform his duties and exercise his powers in a manner that is lawful, must respect the law and to the best of their capability, prevent and oppose any violations in the event of violation through abuses of any powers.
26. The 1st to 3rd Respondents are actuated by a desire to oppressing us the Applicants into acceding to demands by brandishing the sword of punishment under the criminal justice system and which is not a desire to punish on behalf of the public a crime that has actually not been committed.
27. It’s their case that though the 2nd Respondent has the right to investigate complaints made to him, the decision to prosecute is the sole prerogative of the 3rd Respondent.
28. The statement as recorded by the 1st Applicant formed the basis preliminary findings of its investigations and it is on the basis of the charge.
29. The decision by the 3rd Respondent to merely rubberstamp the decisions of the 1st and 2nd Respondents so as to have the Applicants charged unreasonable irrational.
30. It is their case therefore that in making the decision to institute the criminal proceedings, the 3rd Respondent has breached its duties under Article 157 (1) of the Constitution which requires him to always act judiciously and not in perpetuation of an unfair and malicious criminal complaint.
31. The Applicants believe that the 3rd Respondent ignored his primary duty of ensuring that the right to a fair trial cannot be limited thus raising the bar in the determination of the question on whether or not to prosecute by not making whimsical decisions and in violation of Articles 50(1) and 157(1) of the Constitution.
32. Article 157 of the Constitution commands the 3rd Respondent to ensure that the need to prevent and avoid abuse of the legal process through the criminal justice system is ensured, and to this end this Court has the jurisdiction to stop any process of prosecution that can lead to abuse of power.
33. They argue that this Honourable Court has the jurisdiction and powers to interrogate any question as to whether on the basis of the investigations by the 2nd Respondent and the impugned decision by the 3rd Respondent to prosecute us before the 4th Respondent is consistent with Article 157 of the Constitution , and where these expectations have not been met as in the instant case , terminate the proceedings so as to secure the ends of justice and restrain the abuse of its processes that may lead to harassment and persecution.
34. Pursuant to the leave that was granted by this Court on 19th February 2024, the Applicant filed a Supplementary Affidavit sworn on 28th February 2024 availing the Judgment delivered on 4th November 2022 by Tax Appeals Tribunal in Tax Appeal No. 408 of 2021: London Distillers (K) Limited v. Commissioner of Investigation and Enforcement (“the Appeal”).
35. It is argued that the objection decision of 9th June 2021 by the Respondent was as follows: -
“ You are however, reminded of your right of appeal as provided in Section 52 of the Tax Procedures Act, 2015 and Section 13 of the Tax Appeals Tribunal Act.”
36. The 2nd Applicant filed a Notice of Appeal dated 1st July 2021 in the Tax Appeals Tribunal (“the Tribunal”) in respect thereof and subsequently filed a Memorandum of Appeal dated 12th July 2021 which was filed in the Tribunal on 19th July 2021, pursuant to Section 52 of the Tax Procedures Act, 2015 and Section 13 of the Tax Appeals Tribunal Act.
37. During the pendency of the said Appeal 19th July 2021, the 2nd and 3rd Respondents at the behest of the 1st Respondent instituted criminal proceedings against the Applicants.
38. It is submitted that this was based on the Notice of Assessment dated 18th March 2021 and the objection decision of 9th June 2021 being Nairobi CMC Criminal Case No. 802 of 2021; Republic -vs- Mohan Galot & London Distillers (K) Limited (“the criminal case”). The Charge Sheet dated 19th July 2021 has many counts.
39. It is submitted that in the Judgement of the Tribunal, the objection decision dated 6th June 2021 by the 1st Respondent was set aside in totality, thereby upholding the 2nd Applicant’s objection dated 16th April 2021 to the effect that no taxes were due and owing to the 1st Respondent as per the Notice of Assessment dated 18th March 2021.
40. The said Judgement is in full force and effect as at the time of filing these submissions, since the same has not been set aside on appeal or otherwise.
41. The Applicants submit that the Tribunal held and concluded, inter alia, as follows:
“157. From an analysis of the two parties'' cases, it is, firstly, clear to the Tribunal that the Respondent undertook a visit to the Appellant''s premises after the assessment dated 18th March 2021, the objection decision dated 9th June 2021 and a notice of appeal to the Tribunal by the Appellant dated 1st July 2021 had been issued. This visit was supposed to physically verify issues surrounding bottles in a bid to get further clarification on the input-output analysis it had undertaken. To the extent that this visit happened after the assessment and the objection decision were issued, the question that arises is "what was the aim of the said visit at the time it was undertaken?"
158. A review by the Tribunal of the correspondences between the two parties has also established that the Appellant provided, at different times, various clarifications on the issues raised. Specifically, the Appellant provided an analysis of bankings on 28thJuly 2020 and on 30th July 2020. Further, on 4th July 2020, the Appellant provided a clarification on stamps from spirit and ready to drink product as well as an excise stamps clarification on bottles. Also, in the letter dated 4th July 2020, the Appellant provided a work in progress report on input-output analysis. Thereafter, in its letter of 18th August 2020 the Appellant submitted its clarifications on input-output analysis. Additionally, in its letter dated 13thOctober 2020, the Appellant responded to the issues raised by the Appellant''s letter of 6th September 2020 covering excise stamps reconciliation and input-output analysis of bottles.
159. The Tribunal has further observed that at no point does the Respondent refer to having reviewed actual production records maintained at the Appellant including the outcome of a review of flow meter readings or data from the Appellant''s factory''s production accounting system as installed under the supervision of the Respondent, its resident officer''s involvement in the exercise nor the outcome of a physical verification of bottles at the factory as had been agreed with the Appellant.
167. It is also not lost to the Tribunal that the Respondent’s witness on 27th July 2022, confirmed that in its investigative exercise, the Respondent’s investigative team neither verified production records including flow meter readings at the Appellant’s premises nor reviewed any records and/information maintained by its resident officer stationed at the Appellant’s factory.
172. It is the Tribunal''s view that the Respondent, in this Appeal, did not dispense with the above requirements of the Evidence Act in respect to tax evasion. Furthermore, the standard of proof in such cases is distinctively higher than the normal standard of the balance of probability and the Respondent did not attain or satisfy that proof. Under the circumstances therefore, the Tribunal noted that other than merely stating that there were issues relating to tax evasion involving the Appellant herein, the Respondent failed to prove it on the part of the Appellant to the satisfaction of the Tribunal.
178. In this regard, the Tribunal is unable to establish the basis of the Respondent’s computed variance of 168,088 litres of ready to drink product. Further, and as has been discussed in depth in the Appellant’s submissions, the Respondent did not respond to the Appellant’s explanations on the Appellant’s ready to drink stamps usage neither did the Respondent verify the same when it visited the Appellant’s premises.
180. Consequently, the Tribunal finds that the Respondent did not justify, either in law or otherwise, its Corporation Tax, Excise Duty and VAT assessment on the Appellant.
FINAL DECISION
181. In view of the foregoing and evidence before us, we find the Appeal to be merited.
Accordingly, the Tribunal makes the following orders: -
a) The Appeal be and is hereby allowed.
b) The Respondent’s decision dated 9th June 2021 be and is hereby set aside.”
42. They submit that it is trite that Judicial Review is concerned with the legality and fairness of the decision-making process undertaken by administrative bodies. The primary focus is whether the process leading to the impugned decision was lawful, procedurally fair, and within the jurisdiction of the decision-making body.
43. The Applicants submit that according to the findings of the Tribunal in the said Judgement, the following matters were clearly settled by the Tribunal: -
a. The 1st Respondent’s assessment process which led to the Notice of Assessment dated 18th March 2021 was procedurally flawed. In particular, the 1st Respondent failed to conduct a physical visit to the 2nd Applicants premises prior to issuing the assessment and the objection decision. This was contrary to the tenets and rules of Natural Justice and a clear breach of Article 47 of the Constitution on Fair Administrative Action.
b. The 1st Respondent did not consider the clarifications provided by the Applicants before issuing the Notice of Assessment dated 18thMarch 2021 and in making its objection decision on 9th June 2021. As such, the process of assessment was fundamentally defective and unfair and also contrary and inconsistent with the Rules of Natural Justice as well as Article 47 of the Constitution.
c. Due process was not followed in the 1st Respondent’s assessment that formed the basis of the criminal case against the Applicants. The criminal case proceedings are therefore unlawful and a breach of the Applicants’ Constitutional Rights. In any event, they ought not have been initiated during the pendency of the Appeal before the Tribunal.
44. Judicial Review is an administrative remedy that is meant to put checks and balances when an administrative body abuses its power against a party in dispute.
45. Reliance is placed in the case of Republic v Attorney General & 4 others Exparte Diamond Hashim Lalji and Ahmed Hasham Lalji [2014] eKLR, (pages 88-111 of the Applicants’ Bundle of Authorities see page 101); and held as follows: -
“... Judicial review Applications do not deal with the merits of the case but only with the process. In other words, judicial review only determines whether the decision makers had the jurisdiction, whether the persons affected by the decision were heard be/ore it was made and whether in making the decision the decision maker took into account relevant matters or did take into account irrelevant matters...”
46. They submit that Section 7(1) of the Fair Administrative Actions Act, No. 4 of 2015 to review an administrative action or decision, if the person who has made the decision has acted in excess of jurisdiction or power conferred to him under any written law and has been reasonably suspected of bias having denied the persons to whom the administrative actions or decision relates, a reasonable opportunity to state their case.
47. They submit that this is exactly what the 1st Respondent did before issue the Notice of Assessment dated 18thMarch 2021 and the objection decision of 9th June 2021.
48. They submit that the immediate effect of the 1st Respondent’s flawed assessment process as determined by the Tribunal, is that the alleged tax liability upon which the criminal case is based had not been properly and accurately established at the time the charges were preferred. A procedurally flawed and defective administrative action, such as the 1stRespondent’s tax assessment and objection decision renders the criminal case null and void and therefore invalid.
49. In Patrick Macharia Nderitu v Director of CID & another [2017] KEHC 4275 (KLR) (pages 1-9 of the Applicants’ Bundle of Authorities see page 6); the Court (Aburili J.) held as follows: -
“As correctly discussed by Honourable Justice Odunga J in JR 130/2013, in order for an Application for judicial review to succeed, the Applicant has to show that the decision or act complained of is tainted with illegality, irrationality or procedural impropriety. Illegality is when the decision-making authority commits an error of law in the process of taking or making the act, the subject of the complaint.
Acting without jurisdiction or ultra vires, or contrary to the provisions of a law or its principles are instances of illegality. Irrationality is where there is such gross unreasonableness in the decision taken or act done, that no reasonable authority addressing itself to the facts before it, would have made such a decision. Such a decision is usually in defiance of logic and acceptable moral standard. Procedural impropriety is where there is failure to act fairly on the part of the decision-making authority in the process of taking a decision.” Emphasis added.
50. In Republic v Kenya Revenue Authority (KRA) & 4 others; New Flamingo Hardware & Paints Limited & 22nd others (Ex Parte) [2020] KEHC 10284 (KLR) (pages 10-25 of the Applicants’ Bundle of Authorities see page 22); the Court (W. Korir J. as he then was) held as follows:
“In Republic v Public Procurement Administrative Review Board & 2 others [2019] eKLR; Nairobi HC Misc. Civil Application No. 187 of 2018 it was postulated that:
“29. Procedural impropriety generally encompasses two things: procedural ultra vires, where administrative decisions are challenged because a decision-maker has overlooked or failed to properly observe statutory procedural requirements; and common law rules of natural justice and fairness. Lord Diplock noted that "failure by an administrative tribunal to observe procedural rules that are expressly laid down in the legislative instrument by which its jurisdiction is conferred, even where such failure does not involve any denial of natural justice," is a form of procedural impropriety….
... In a broader sense the ultra vires principle has been used as the vehicle through which to impose a number of constraints on the way in which the power given to the agency has been exercised: it must comply with rules of fair procedure, it must exercise its discretion to attain proper and not improper purposes, it must not act unreasonably etc. The ultra vires principle thus conceived provided both the basis for judicial intervention and also established its limits.”
An ultra vires action is one which is taken either when the administrator does not have the capacity to make a particular decision or take a particular action; or where the administrator has the capacity but fails to follow the laid down procedure for making such a decision or action. KRA was established with the mandate of assessing and collecting revenue, and the administrative enforcement of the laws relating to revenue. Even though KRA has the authority to collect taxes, including unpaid taxes, the exercise of such powers must still be done according to the law.
The Respondents (KRA) in exercising their authority failed to follow the proper procedure before making demands for unpaid taxes. By failing to provide the Applicants with amended tax assessments, failing to give them not less than 30 days to respond, and not informing them of their option for objecting to the proposed actions, the Respondents acted ultra vires and failed to follow the due process. Emphasis Added.
51. In Skydive Diani Club v Ministry of Interior and Coordination of National Government & another [2019] eKLR (pages 26-33 of the Applicants’ Bundle of Authorities see page 31); the Court (Ogembo J.) held as follows: -
“This Court associates itself with the Canadian Supreme Court decision in Baker vs. Canada (Minister of Citizenship & Immigration) 2 S.C.R. 817 6 where it was held:
“The values underlying the duty of procedural fairness relate to the principle that the individual or individuals affected should have the opportunity to present their case fully and fairly, and have decision affecting their rights, interests, or privileges made using a fair, impartial and open process, appropriate to the statutory, institutional and social context of the decisions.” Emphasis added.
52. Similarly, Sergon J. in Ali v Mohammed & 3 others [2022] KEHC 13769 (KLR) (pages 34-39 of the Applicants’ Bundle of Authorities see page 38); the Court (Sergon J.) observed as follows:
“… If indeed the principles of natural justice are violated in respect of any decision, it is indeed immaterial whether the same decision would have been arrived at in the absence of the departure from essential principle of justice. The decision must be declared to be no decision…It is paramount at this juncture that this court establishes the ingredients and/or components of natural justice. The principles of natural justice concern procedural fairness and ensure a fair decision is reached by an objective decision maker. Maintaining procedural fairness protects the rights of individuals and enhances public confidence in the process. The ingredients of fairness or natural justice that must guide all administrative decisions are, firstly, that a person must be allowed an adequate opportunity to present their case where certain interests and rights may be adversely affected by a decision-maker; secondly, that no one ought to be judge in his or her case and this is the requirement that the deciding authority must be unbiased when according the hearing or making the decision; and thirdly, that an administrative decision must be based upon logical proof or evidence material”. Emphasis added.
53. The criminal case is predicated upon the Notice of Assessment dated 18thMarch 2021 and the objection decision of 9th June 2021 by the 1st Respondent. The Tribunal in its Judgement aforesaid set aside the said objection decision and indeed the assessment. The Judgement of the Tribunal is in full force and effect since the same has not been set aside on Appeal or otherwise. Most importantly according to them the Tribunal in its Judgement held as follows regarding the taxes that are in issue in the criminal case:
“180. Consequently, the Tribunal finds that the Respondent did not justify, either in law or otherwise, its Corporation Tax, Excise Duty and VAT assessment on the Appellant. “
54. They reiterate that the process leading to Notice of Assessment dated 18th March 2021 and the objection decision dated 9th June 2021 by the 1stRespondent was flawed, unfair, defective and inconsistent with the Rules of Natural Justice and contrary to Article 47 of the Constitution.
55. In Republic v Director of Public Prosecutions & 2 others; Kinyua (Exparte Applicant); Atta Kenya Limited & another (Interested Parties) [2024] KEHC 13596 (KLR), (pages 40-54 of the Applicants’ Bundle of Authorities see page 47); the Court (Sewe J.) observed as follows:
“The same position was reiterated by the Court of Appeal in Joram Mwenda Guantai v The Chief Magistrate, Nairobi Civil Appeal No. 228 of 2003 [2007] 2 EA 170, as follows:
“… Equally so, the High Court has inherent jurisdiction to grant an order of prohibition to a person charged before a subordinate court and considers himself to be a victim of oppression. If the prosecution amounts to an abuse of the process of the court and is oppressive and vexatious, the Judge has the power to intervene and the High Court has the inherent power and the duty to secure fair treatment for all persons who are brought before the court or to a subordinate court and to prevent an abuse of the process of the court.”
As for Certiorari, the Court of Appeal held as follows in Kenya National Examination Council v Republic, Ex Parte Geoffrey Gathenji Njoroge & 9 others (supra):
“…Only an order of Certiorari can quash a decision already made and an order of certiorari will issue if the decision is made without or in excess of jurisdiction, or where the rules of natural justice are not complied with or for such like reasons…”
56. The 3rd Respondent is bound by Article 157(11) of the Constitution which states that:
“In exercising the powers conferred by this Article, the Director of Public Prosecutions [DPP] shall have regard to the public interest, the interests of the administration of justice and the need to prevent and avoid abuse of the legal process."(Emphasis Added)
57. In the case of Douglas
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