Background
1. This is an appeal arising from the decision of the Tax Appeals Tribunal (“the Tribunal”) dated 26th April 2024, dismissing the Appellant’s appeal and affirming the Respondent’s (the Commissioner’s) Review Decision dated 20th June 2023, by which the Respondent demanded payment of customs duties pursuant to Transit Security Bonds – CB8 executed by the Appellant.
2. The genesis of the dispute is that between 2011 and 2013, the Appellant executed several CB8 bonds in the sum of Kshs. 21,165,536.07 to cover various products imported from various countries through the port of Mombasa to countries outside Kenya. The transit period was 30 days, and if proof of export was not provided, then the products would be presumed to have been consumed within the country, in which case, the Appellant, as a surety, will ensure payment of import duty by liquidating the security bonds.
3. The Appellant’s case at the Tribunal is that after proving the securities between 2011 and 2013, they did not hear from the Commissioner with regard to the customs bonds until 19th April 2023, when they received a letter from the Commissioner demanding payment of the taxes covered by the subject transit bonds (Kshs. 21,165,536.07) under section 109 (1) of the East African Community Customs Management Act (“EACCMA, 2004”) on account that the bonds had not been cancelled within the thirty (30) days from the date of exportation, an indication that the goods were consumed within the country, and therefore liable to import duty.
4. The Appellant, vide their tax agent's letter of 15th May 2023, applied for a review of the tax demand under Section 229 of the ECCMA, 2004, arguing that the Commissioner had slept on his rights for over ten (10) years, and also failed to demonstrate that the efforts he had made in first recovering the taxes from the principals.
5. Further, the Appellant contended that the Commissioner failed to make a Review Decision on its Application for Review within the thirty (30) days prescribed under Section 229(4) of the EACCMA,2004.
6. The Commissioner, on the other hand argued that the Review Decision was made on 20th June 2023, well within the timelines provided under the law, taking into account that the parties had extensively engaged prior to the said Review Decision. Consequently, the Commissioner confirmed the tax demand.
7. Dissatisfied with the Commissioner’s decision, the Appellant filed an appeal at the Tax Appeals Tribunal against the decision on 17th November 2023, alleging that the following: -
a) That the Review Decision was issued outside the thirty (30) days’ timeline provided in law;
b) That the bonds had expired pursuant to the provisions of Section 107(3) of the EACCMA, 2004, and were therefore not enforceable;
c) That the Tax demand was time-barred under both Section 55 of the Insurance Act and Section 235 of the EACCMA, 2005
d) That the Commissioner ought to have first pursued the principal debtors before coming for the Appellant, who was a mere guarantor;
e) That the Commissioner was guilty of laches in making the tax demand more than 10 years after the date of the security bonds; and,
f) That the Commissioner breached the Appellant’s legitimate expectation.
8. On 12th July 2024, the Tribunal delivered its judgment and found the Appellant’s appeal to be without merit. The Tribunal dismissed the same and upheld the Commissioner’s Review Decision of 20th June 2023.
The Appeal & Submissions
9. Aggrieved by the Tribunal’s decision, the Appellant appealed to this Court, raising a total of fourteen (14) grounds of appeal, several of which are quite repetitive. Key among the grounds are that:
i. The learned members of the Tribunal fell into serious error and misdirected themselves in law by disregarding the evidence adduced by the Appellant which demonstrated that the Commissioner failed to issue or communicate its Review Decision of 20th June 2023 on the Appellant’s Application for Review within thirty (30) days as envisaged under Section 229(4) of the East African Community Customs Management Act (EACCMA).
ii. That the learned members of the Tribunal fell into serious error and misdirected themselves in law by requiring the Appellant to produce evidence of cancellation of CB8 Customs Transit Security Bonds covering the years 2011 to 2013, which requirement was onerous and in violation of the Appellant’s right to adequately defend itself, after the lapse of the statutory seven (7) years which the Appellant was required to keep such records.
iii. That the learned members of the Tribunal erred and misdirected themselves by sanctioning the enforcement and payment of CB8 Customs Transit Security Bonds, which the Commissioner was required to discharge after the expiration of three (3) years from the date they were issued, according to Section 107(3) of EACCMA.
iv. That the learned members of the Tribunal erred and misdirected themselves in law by ignoring the principle that when a tax legislation is ambiguous, in this case the provisions of Section 107 (3) and 108 (1) of the EACCMA, the ambiguity ought to be interpreted in favour of the taxpayer.
v. That the learned members of the Tribunal erred and misdirected themselves in law by sanctioning the enforcement and payment of CB8 Customs Transit Security Bonds, which laboured under the handicap of limitation of action pursuant to Section (4) (1) of the Limitation of Actions Act CAP 22 Laws of Kenya.
vi. That the Tribunal erred in law in affirming a Review Decision where the Commissioner had failed to first demand and/ or pursue the Principal Debtors for the outstanding import duties before purporting to demand due performance for expired CB8 Customs Transit Security Bonds.
vii. That the Tribunal misdirected itself by failing to find that the Commissioner’s demand for outstanding CB8 Customs Transit Security Bonds was unjust and in breach of the Appellant’s legitimate expectation.
Appellant’s Submissions
10. The Appellant structured its submissions around three distinct grounds of appeal. First, it contended that the Tribunal erred both in fact and in law by failing to find that the Commissioner’s letter dated 20th June 2023 was issued outside the statutory timeline set under Section 229(4) of the EACCMA. Second, the Tribunal was faulted for holding that the Appellant had not discharged its burden of proof in relation to the security bonds. Third, the Appellant argued that the Tribunal failed to recognize that the Commissioner’s demand violated the Appellant’s legitimate expectation.
11. On the issue of timelines, the Appellant argued that the Tribunal wrongly found that the Commissioner’s review decision was issued within the prescribed period. It was the Appellant’s case that, having lodged its application for review on 15th May 2023, the Commissioner was required to issue a decision by 16th June 2023. The notification given on 21st September 2023, therefore, fell outside the statutory limit.
12. The Appellant maintained that the Tribunal erred in shifting the burden to the Appellant to prove the date of the decision, whereas it was the Respondent’s obligation to demonstrate that the decision was rendered within the thirty-day period set by law.
13. Citing Republic v Commissioner of Customs Services ex parte Unilever Kenya Limited [2012] eKLR, the Appellant emphasized that compliance with statutory timelines is mandatory. In line with Section 229(5) of the EACCMA, failure by the Commissioner to issue a timely decision results in the application being deemed allowed by operation of law.
14. On the burden of proof, the Appellant argued that the Tribunal erred by requiring it to prove that the security bonds had been cancelled. Given that the demands were issued over a decade after the events in question, it was unreasonable to expect the Appellant to produce records after such a prolonged period.
15. The Appellant further contended that this requirement to produce long-lapsed records imposed an undue and unfair burden, infringing its right to a fair hearing. It argued that it could not be penalised for failing to retain documents beyond the period it was legally obligated to keep them.
16. The Appellant submitted that the Tribunal failed to consider Section 107(3) of the EACCMA, which stipulates that customs bonds are valid for a maximum of three years. This, the Appellant argued, aligns with the Respondent’s own Bond Procedure Policy, which also limits the validity of general customs bonds to three years, unless replenished.
17. In any event, the Appellant argued that even if the bonds were deemed valid (which it denied), the Commissioner’s prolonged delay amounted to waiver, acquiescence, or laches. It maintained that any claim to enforce the bonds had been abandoned.
18. The Appellant also faulted the Tribunal for overlooking the applicability of Section 120 of the Evidence Act, which codifies the common law doctrine of estoppel. Since the Respondent had accepted bonds that expressly provided a one-year validity period, it was estopped from later asserting that they remained in force beyond that time. In support, the Appellant cited Serah Njeri Mwobi v John Kimani Njoroge [2013] eKLR.
19. Referring to Sections 73 and 85 of the EACCMA, the Appellant noted that goods covered by customs bonds are to be exported, with proof of such exportation submitted within thirty days. It therefore argued that the Respondent ought to have verified bond compliance within that timeframe, not over ten years later as was done in this case.
20. The Appellant further argued that the demand by the Respondent, being based on a contract of guarantee, was time-barred under Section 4(1) of the Limitation of Actions Act (Cap 22). It submitted that any action founded on contract must be brought within six years of accrual. Relying on South Nyanza Sugar Company Limited v Dickson Aoro Owuor [2019] eKLR, it asserted that enforcement could only be pursued within six years from the breach—effectively, one year from bond issuance.
21. Additionally, the Appellant submitted that the Tribunal failed to consider statutory timelines for record retention under both customs and insurance law. It cited Section 235 of the EACCMA, which prescribes a five-year retention period, and Section 55 of the Insurance Act, which requires records to be retained for seven years. The Appellant argued that its obligation to retain records had long lapsed and the Tribunal erred in ignoring this legal framework.
22. The Appellant further submitted that these statutory limitations gave rise to a legitimate expectation that it would not be queried on the bonds beyond the relevant period. It relied on Republic v Kenya Revenue Authority Ex Parte M-Kopa Kenya Limited [2018] eKLR and Keroche Breweries Limited v KRA & 5 Others [2007] KLR 240 in support of this principle.
23. In conclusion, the Appellant urged the Court to allow the appeal, set aside the Commissioner’s Review Decision dated 20th June 2023, quash the tax demands arising therefrom, and award the Appellant costs of both this appeal and the proceedings before the Tax Appeals Tribunal.
The Respondent’s Submissions
24. The Commissioner/Respondent opposed the Appeal vide its Statement of Facts dated 5th February 2025, as well as its submissions dated 22nd May 2025.
25. The Commissioner argued that the Tribunal lacked jurisdiction to hear the Appellant’s appeal on the grounds that it was incompetent, having been filed outside the timelines stipulated under both the EACCMA, 2004 (Section 230 thereof), and Section 13 of the Tax Appeals Tribunal Act. As a result, the Respondent submitted that the Tribunal’s judgment, being founded on an appeal filed out of time, is void ab initio and cannot form a lawful basis for an appeal before this Court.
26. The Commissioner submitted that the review decision was made and communicated to the Appellant on 20th June 2023, but the Appellant failed to lodge an appeal within the time prescribed by law. That, although the Appellant claimed it did not receive the decision until it requested a copy on 20th September 2023, the Respondent pointed out that the decision was again re-forwarded on 21st September 2023. That, even if the latter date were to be considered, the Commissioner maintained that the Appellant’s appeal at the Tribunal having been filed on 17th November 2023, was still filed outside the timelines specified under both Section 230(2) of the EACCMA, 2004; and Section 13 (1) and (2) of the Tax Appeals Tribunal.
27. It was further the Commissioner’s position that, contrary to the Appellant’s arguments, the Review Decision in this case was issued on 20th June 2023, which is well within the 30 days’ timeline required under section 229(4) of the EACCMA, 2004.
28. The Respondent argued that the Appellant’s request for review was received on 15th May 2023, and that the Respondent subsequently sought further information on 17th May and 8th June 2023. Upon receiving the necessary information, the Respondent issued its review decision on 20th June 2023, well within the 30-day timeframe set out under section 229(4) of the EACCMA. The Respondent maintained that the review decision was later re-forwarded on 21st September 2023, accompanied by a covering letter referencing the legal basis for the demand.
29. Additionally, the Commissioner disputed the Appellant’s interpretation of Section 107 of the EACCMA, 2004, and submitted that contrary to the Appellant’s assertion, the section provides that a bond can only be cancelled upon discharge of the same and endorsement to that effect made thereon not by effluxion of time (3 years) as claimed by the Appellant.
30. The Respondent submitted that under Section 108 (1) of the EACCMA, 2004, the Appellant, as surety, was deemed to be the principal debtor and could not be discharged from liability due to inaction or delay in enforcement, where its principal(s) have defaulted in their obligations to the Commissioner.
31. The Respondent maintained that there was no legal basis for the Appellant to claim estoppel, legitimate expectation, or reliance on the Limitation of Actions Act, as customs bonds were governed by a specific statutory regime with no limitation period for recovery unless the bonds had been properly discharged. They further submitted that under Regulation 104 of the EACCMA Regulations, where no proof of exportation was submitted, the goods were deemed to have been imported for home consumption, and the surety became liable for the corresponding duty.
32. To support its position, the Respondent relied on judicial decisions including Corporate Insurance Co. Ltd v. Nyali Beach Hotel and Kenindia Assurance Co. Ltd v. First National Finance Bank Ltd, which affirmed that a surety's obligation becomes due upon default and demand, and cannot be defeated by procedural technicalities or lapse of time.
33. The Respondent, therefore, urged this Court to dismiss the appeal with costs.
Analysis and determination.
34. I have carefully considered the Appellant’s Memorandum of Appeal dated 6th September 2024, the Respondent’s Statement of Facts dated 5th February 2025, as well as the written submissions filed by both parties in support of their respective positions. The Court identifies the following as issues requiring determination:
i. Whether the Appellant’s appeal before the Tribunal was filed out of time and was therefore incompetent.
ii. Whether the Review Decision dated 20th June 2023 was issued within the timelines prescribed under Section 229(4) of the EACCMA.
iii. Whether the Respondent was justified in enforcing the subject transit bonds despite the lapse of time.
iv. Whether the demand by the Respondent contravened the doctrines of estoppel, legitimate expectation, or was time-barred under the Limitation of Actions Act.
v. Who should bear the costs of the appeal.
Competency of the Appeal before the Tribunal
35. The Respondent asserts that the appeal lodged at the Tribunal was incompetent, having been filed outside the 45-day period provided under Section 230(1) of the EACCMA, 2004. The Appellant, on the other hand, contends that it did not receive the review decision until September 2023, and promptly acted thereafter.
36. Section 230 (2) of the EACCMA, 2004 provides that: -
“(2) A person intending to lodge an appeal under this section shall lodge the appeal within forty-five days after being served with the decision, and shall serve a copy of the appeal on the Commissioner.”
37. Further, section 13 of the TAT Act provides that a notice of appeal from the decision of the Commissioner is to be lodged at the Tribunal within 30 days from the date of receipt of that decision.
38. In the present case, it is not disputed that the Review Decision is dated 20th June 2023. It is equally common ground that the Appellant’s appeal to the Tribunal was lodged on 17th November 2023. What is in dispute is when the Review Decision was served on the Appellant. While the Respondent argues that the same was issued and served on that date, and only re-forwarded on 21st September 2023, the Appellant’s position is that the Review Decision was served on them on 21st September 2023.
39. From the parties' assertions, it is clear that from whatever angle one looks at it, whether the date of notification of the decision was 20th June 2023 as advanced by the Respondent, or 21st September 2023 as claimed by the Appellant, the filing of the Appeal on 17th November 2023 was obviously outside the timelines prescribed under the law.
40. I note from the record that the Tribunal did not render itself on this question despite the issue of competence of the appeal having been raised by the Respondent as a preliminary point. Additionally, it is also apparent from the record that the Appellant has not, in its submissions in this appeal, responded to the issue.
41. There is no evidence that was adduced by the Appellant at trial, demonstrating that there was any extension by the Tribunal of the period within which to lodge the appeal thereat. Consequently, this Court finds that the appeal before the Tribunal was lodged outside the statutory timelines and was therefore incompetent in that regard.
42. Notwithstanding my finding above, I will nonetheless proceed to consider the remaining issues identified for determination. I will then make a final conclusion on this particular issue in light of the outcomes of the others.
Timeliness of the Review Decision
43. The Appellant contends that the review decision was not rendered within 30 days as required by Section 229(4) of the EACCMA, 2004, and thus should be deemed allowed under Section 229(5).
44. Section 229 (4) of the EACCMA, 2004 provides that: -
“Where the Commissioner does not make a decision within thirty days of receiving an application for review, the Commissioner shall be deemed to have made a decision to allow the application.”
45. In the present case, it is a common ground that the review application was lodged on 15th May 2023. From the record, I note that parties engaged, including through the emails dated 17th May 2023 and 8th June 2023, which culminated in a Review Decision dated 20th June 2023. I also note from the record that even after 20th June 2023, parties still held a joint meeting on 26th September 2023, where it was agreed that the Commissioner was to, “(i)…...share a list of all outstanding bonds with The Monarch Insurance Company and Focus Tax Consultants, and (ii) Recommend lifting of suspension after payment of Kshs. 55,145,501.07”; the Appellant was to, “Pay Kshs. 55,145,501.07 under the OAG query, and (ii) Account for the outstanding bonds Kshs. 2,591,028,084.00.”
46. The Appellant contended that, having applied for review of the Commissioner’s decision on 15th May 2003, Section 229(4) of the EACCMA, 2004, the Commissioner had only up to 16th June 2023 to make a review decision, and not 21st September 2023 as was the case herein. I find this argument not plausible. First, the argument fails to take into account the engagements the parties had post-15th May 2023, the date of the Appellant’s Review application. Secondly, apart from the allegation by the Appellant that the Respondent used the wrong e-mail in forwarding the letter, I find no credible evidence adduced by the Appellant in support of its argument that the Review Decision was issued outside the 30 days authorized under Section 229(4).
47. As indicated above, parties engaged on the issue up to and including 26th September 2023, when they had a meeting in an attempt to resolve the dispute. It is evident from the minutes of that meeting that there was some information that the Appellant was still expected to supply to the Respondent. There is no evidence on record that the Appellant ever supplied this information prior to 17th November 2023, when they filed their appeal at the Tribunal.
48. Section 229 (4) is clear that the 30-day period within which the Commissioner is required to communicate a decision is triggered by either: (i) the receipt of the application for review, or (ii) the receipt of further information required by the Commissioner, whichever is later. In Commissioner of Domestic Taxes v CFAO Agri Limited (ITA No. E113/2024), this Court in a judgment delivered on 30th June 2025, held as follows on the interpretation of Section 229(4) of the EACCMA, 2004: -
“A careful reading of Section 229(4) reveals that the 30-day period within which the Commissioner is required to communicate a decision is triggered by either: (i) the receipt of the application for review, or (ii) the receipt of further information required by the Commissioner — whichever is later. The provision is clearly worded, and in this case, it is undisputed that the Commissioner did request additional information and undertook a site/factory visit, in which the Respondent participated fully.”
49. I adopt the above reasoning in the present case. The Appellant alleged that the Review Decision was erroneously sent to the email address focustaxadvisory@gmail.com instead of the correct address, focustaxadvisiory@gmail.com. However, beyond this assertion, the Appellant did not adduce any concrete evidence to demonstrate that it did not receive the Review Decision within the statutory timelines. Moreover, email correspondence exchanged between the parties after the fact shows that the Appellant did not raise any further objections upon being informed by the Respondent that a response to the review application had been issued via the Respondent’s letter dated 20th June 2023. In an email dated 21st September 2023, Mr. Peter Mochama, the Appellant’s Technical Manager, stated:
“Following our letter of yesterday to KRA, they have responded, saying they did respond to our objection and that the response was addressed to our consultant.
We have since received a copy of the alleged response, and the same is attached…”
50. Even assuming, for argument’s sake, that the letter was initially sent to the wrong email address as claimed by the Appellant, the evidence on record confirms that the decision itself was made on 20th June 2023, well within the thirty-day period stipulated under the law. What is required under Section 229(4) of the EACCMA is that the Commissioner make a decision within thirty days of receiving the application for review, taking into account any subsequent engagements between the parties. That threshold was clearly met in this case.
51. Furthermore, the record shows that there was ongoing communication and engagement between the parties from April 2023, when the tax demand was issued, through to September 2023, when the Appellant claims it became aware of the Review Decision. These engagements included email correspondence as well as physical meetings. In the view of this Court, it would be unreasonable, and indeed contrary to the evidence, to conclude that the decision was made outside the statutory timeframe.
52. On the totality of the evidence, the Court is satisfied that the review decision was made within the timeframes contemplated under Section 229(4). This ground fails.
Enforceability of the Expired Bonds
53. The Appellant challenges the enforcement of the bonds, contending that they were executed over a decade ago, had a maximum validity period of three (3) years pursuant to Section 107 (3) of the EACCMA, 2004, and therefore had expired by the time the Respondent sought to enforce the same.
54. Section 107 (3) of the EACCMA, 2004 provides as follows-
“(3) All bonds required to be given under this Act shall be so framed that the person giving the bond, and any surety thereto, is bound to the Commissioner for the due performance of the conditions of that bond; and any such bond may, unless sooner discharged by the due performance of the conditions thereof, be discharged by the Commissioner on the expiration of three years from the date thereof, but without prejudice to the right of the Commissioner to require fresh security.”
55. The import of the above section is that the lifespan of a customs bond required under the Act is 3 years, but without prejudice to the right of the Commissioner to require a fresh bond. In this case, the security bonds were executed between 2011 and 2013. It therefore follows that the bonds were to automatically stand discharged upon expiry of three years, unless discharged by the Commissioner earlier. Consequently, the 2011 security bonds, assuming 1st January 2011 as the date of issue, would expire in December 2013. The January 2013 bonds expired by December 2015.
56. In the premises, it is the finding of the Court that the bonds were no longer available and unenforceable three years after the date of issue.
57. However, the expiry of the bonds notwithstanding, Section 108(1) of the EACCMA, 2004 deems a surety (the Appellant) as a principal debtor and does not get discharged or have his liability affected. The Section is clear that:
“108. (1) Without prejudice to any rights of a surety to any bond given under this Act against the person for whom he or she is surety, a surety shall, for all the purposes of any bond, be deemed to be the principal debtor and accordingly the surety shall not be discharged, nor his or her liability affected, by the giving of time for payment, or by the omission to enforce the bond for any breach of any conditions thereof, or by any other act or omission which would not have discharged the bond if he or she had been the principal debtor.” [emphasis added]
58. The Appellant has not shown that such discharge was effected in respect of the subject bonds. The Respondent is therefore entitled under Section 108(1) of the EACCMA to recover duty from the surety where there has been default by the principal.
59. This position is well established in law, as was held in Kenindia Assurance Co. Ltd v First National Finance Bank Ltd and Corporate Insurance Co. Ltd v Nyali Beach Hotel, that the liability of a surety arises immediately upon default and demand, and is not defeated by the passage of time unless discharged by the creditor.
On Limitation of Actions/ Doctrines of Estoppel, and Legitimate Expectation
60. The Appellant has argued that the Respondent is estopped from enforcing the bonds and that the claim is time-barred under Section 4(1) of the Limitation of Actions Act.
61. The Court rejects this argument. As pointed out above, the enforcement of customs bonds is governed by a special statutory regime under the EACCMA,2004. Unless a bond has been properly discharged under Section 107(3), no limitation period applies. The Limitation of Actions Act is of general application and does not override express provisions of special legislation.
62. Similarly, the doctrine of legitimate expectation cannot override clear statutory duties. While legitimate expectation protects procedural fairness, it does not confer immunity from compliance with the law. The Appellant has not demonstrated any unequivocal representation by the Respondent that enforcement would not be pursued.
63. The Court also rejects the invocation of estoppel under Section 120 of the Evidence Act. The Appellant, as a party to the executed customs bonds, is bound by their terms and cannot plead estoppel to defeat the statutory mandate of the Commissioner under the EACCMA. The doctrine of estoppel cannot be employed to negate express statutory obligations.
64. In the result, and save for the argument relating to the expiry of the bonds under Section 107(3) of the EACCMA, 2004, which has been allowed, the appeal is generally devoid of merit and is hereby dismissed.
65. As regards costs, I direct that each party shall bear its own costs.
66. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
10TH DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
Mandela………………….…..for the Appellant
Nyapara……………….…..... for the Respondent
1. This is an appeal arising from the decision of the Tax Appeals Tribunal (“the Tribunal”) dated 26th April 2024, dismissing the Appellant’s appeal and affirming the Respondent’s (the Commissioner’s) Review Decision dated 20th June 2023, by which the Respondent demanded payment of customs duties pursuant to Transit Security Bonds – CB8 executed by the Appellant.
2. The genesis of the dispute is that between 2011 and 2013, the Appellant executed several CB8 bonds in the sum of Kshs. 21,165,536.07 to cover various products imported from various countries through the port of Mombasa to countries outside Kenya. The transit period was 30 days, and if proof of export was not provided, then the products would be presumed to have been consumed within the country, in which case, the Appellant, as a surety, will ensure payment of import duty by liquidating the security bonds.
3. The Appellant’s case at the Tribunal is that after proving the securities between 2011 and 2013, they did not hear from the Commissioner with regard to the customs bonds until 19th April 2023, when they received a letter from the Commissioner demanding payment of the taxes covered by the subject transit bonds (Kshs. 21,165,536.07) under section 109 (1) of the East African Community Customs Management Act (“EACCMA, 2004”) on account that the bonds had not been cancelled within the thirty (30) days from the date of exportation, an indication that the goods were consumed within the country, and therefore liable to import duty.
4. The Appellant, vide their tax agent's letter of 15th May 2023, applied for a review of the tax demand under Section 229 of the ECCMA, 2004, arguing that the Commissioner had slept on his rights for over ten (10) years, and also failed to demonstrate that the efforts he had made in first recovering the taxes from the principals.
5. Further, the Appellant contended that the Commissioner failed to make a Review Decision on its Application for Review within the thirty (30) days prescribed under Section 229(4) of the EACCMA,2004.
6. The Commissioner, on the other hand argued that the Review Decision was made on 20th June 2023, well within the timelines provided under the law, taking into account that the parties had extensively engaged prior to the said Review Decision. Consequently, the Commissioner confirmed the tax demand.
7. Dissatisfied with the Commissioner’s decision, the Appellant filed an appeal at the Tax Appeals Tribunal against the decision on 17th November 2023, alleging that the following: -
a) That the Review Decision was issued outside the thirty (30) days’ timeline provided in law;
b) That the bonds had expired pursuant to the provisions of Section 107(3) of the EACCMA, 2004, and were therefore not enforceable;
c) That the Tax demand was time-barred under both Section 55 of the Insurance Act and Section 235 of the EACCMA, 2005
d) That the Commissioner ought to have first pursued the principal debtors before coming for the Appellant, who was a mere guarantor;
e) That the Commissioner was guilty of laches in making the tax demand more than 10 years after the date of the security bonds; and,
f) That the Commissioner breached the Appellant’s legitimate expectation.
8. On 12th July 2024, the Tribunal delivered its judgment and found the Appellant’s appeal to be without merit. The Tribunal dismissed the same and upheld the Commissioner’s Review Decision of 20th June 2023.
The Appeal & Submissions
9. Aggrieved by the Tribunal’s decision, the Appellant appealed to this Court, raising a total of fourteen (14) grounds of appeal, several of which are quite repetitive. Key among the grounds are that:
i. The learned members of the Tribunal fell into serious error and misdirected themselves in law by disregarding the evidence adduced by the Appellant which demonstrated that the Commissioner failed to issue or communicate its Review Decision of 20th June 2023 on the Appellant’s Application for Review within thirty (30) days as envisaged under Section 229(4) of the East African Community Customs Management Act (EACCMA).
ii. That the learned members of the Tribunal fell into serious error and misdirected themselves in law by requiring the Appellant to produce evidence of cancellation of CB8 Customs Transit Security Bonds covering the years 2011 to 2013, which requirement was onerous and in violation of the Appellant’s right to adequately defend itself, after the lapse of the statutory seven (7) years which the Appellant was required to keep such records.
iii. That the learned members of the Tribunal erred and misdirected themselves by sanctioning the enforcement and payment of CB8 Customs Transit Security Bonds, which the Commissioner was required to discharge after the expiration of three (3) years from the date they were issued, according to Section 107(3) of EACCMA.
iv. That the learned members of the Tribunal erred and misdirected themselves in law by ignoring the principle that when a tax legislation is ambiguous, in this case the provisions of Section 107 (3) and 108 (1) of the EACCMA, the ambiguity ought to be interpreted in favour of the taxpayer.
v. That the learned members of the Tribunal erred and misdirected themselves in law by sanctioning the enforcement and payment of CB8 Customs Transit Security Bonds, which laboured under the handicap of limitation of action pursuant to Section (4) (1) of the Limitation of Actions Act CAP 22 Laws of Kenya.
vi. That the Tribunal erred in law in affirming a Review Decision where the Commissioner had failed to first demand and/ or pursue the Principal Debtors for the outstanding import duties before purporting to demand due performance for expired CB8 Customs Transit Security Bonds.
vii. That the Tribunal misdirected itself by failing to find that the Commissioner’s demand for outstanding CB8 Customs Transit Security Bonds was unjust and in breach of the Appellant’s legitimate expectation.
Appellant’s Submissions
10. The Appellant structured its submissions around three distinct grounds of appeal. First, it contended that the Tribunal erred both in fact and in law by failing to find that the Commissioner’s letter dated 20th June 2023 was issued outside the statutory timeline set under Section 229(4) of the EACCMA. Second, the Tribunal was faulted for holding that the Appellant had not discharged its burden of proof in relation to the security bonds. Third, the Appellant argued that the Tribunal failed to recognize that the Commissioner’s demand violated the Appellant’s legitimate expectation.
11. On the issue of timelines, the Appellant argued that the Tribunal wrongly found that the Commissioner’s review decision was issued within the prescribed period. It was the Appellant’s case that, having lodged its application for review on 15th May 2023, the Commissioner was required to issue a decision by 16th June 2023. The notification given on 21st September 2023, therefore, fell outside the statutory limit.
12. The Appellant maintained that the Tribunal erred in shifting the burden to the Appellant to prove the date of the decision, whereas it was the Respondent’s obligation to demonstrate that the decision was rendered within the thirty-day period set by law.
13. Citing Republic v Commissioner of Customs Services ex parte Unilever Kenya Limited [2012] eKLR, the Appellant emphasized that compliance with statutory timelines is mandatory. In line with Section 229(5) of the EACCMA, failure by the Commissioner to issue a timely decision results in the application being deemed allowed by operation of law.
14. On the burden of proof, the Appellant argued that the Tribunal erred by requiring it to prove that the security bonds had been cancelled. Given that the demands were issued over a decade after the events in question, it was unreasonable to expect the Appellant to produce records after such a prolonged period.
15. The Appellant further contended that this requirement to produce long-lapsed records imposed an undue and unfair burden, infringing its right to a fair hearing. It argued that it could not be penalised for failing to retain documents beyond the period it was legally obligated to keep them.
16. The Appellant submitted that the Tribunal failed to consider Section 107(3) of the EACCMA, which stipulates that customs bonds are valid for a maximum of three years. This, the Appellant argued, aligns with the Respondent’s own Bond Procedure Policy, which also limits the validity of general customs bonds to three years, unless replenished.
17. In any event, the Appellant argued that even if the bonds were deemed valid (which it denied), the Commissioner’s prolonged delay amounted to waiver, acquiescence, or laches. It maintained that any claim to enforce the bonds had been abandoned.
18. The Appellant also faulted the Tribunal for overlooking the applicability of Section 120 of the Evidence Act, which codifies the common law doctrine of estoppel. Since the Respondent had accepted bonds that expressly provided a one-year validity period, it was estopped from later asserting that they remained in force beyond that time. In support, the Appellant cited Serah Njeri Mwobi v John Kimani Njoroge [2013] eKLR.
19. Referring to Sections 73 and 85 of the EACCMA, the Appellant noted that goods covered by customs bonds are to be exported, with proof of such exportation submitted within thirty days. It therefore argued that the Respondent ought to have verified bond compliance within that timeframe, not over ten years later as was done in this case.
20. The Appellant further argued that the demand by the Respondent, being based on a contract of guarantee, was time-barred under Section 4(1) of the Limitation of Actions Act (Cap 22). It submitted that any action founded on contract must be brought within six years of accrual. Relying on South Nyanza Sugar Company Limited v Dickson Aoro Owuor [2019] eKLR, it asserted that enforcement could only be pursued within six years from the breach—effectively, one year from bond issuance.
21. Additionally, the Appellant submitted that the Tribunal failed to consider statutory timelines for record retention under both customs and insurance law. It cited Section 235 of the EACCMA, which prescribes a five-year retention period, and Section 55 of the Insurance Act, which requires records to be retained for seven years. The Appellant argued that its obligation to retain records had long lapsed and the Tribunal erred in ignoring this legal framework.
22. The Appellant further submitted that these statutory limitations gave rise to a legitimate expectation that it would not be queried on the bonds beyond the relevant period. It relied on Republic v Kenya Revenue Authority Ex Parte M-Kopa Kenya Limited [2018] eKLR and Keroche Breweries Limited v KRA & 5 Others [2007] KLR 240 in support of this principle.
23. In conclusion, the Appellant urged the Court to allow the appeal, set aside the Commissioner’s Review Decision dated 20th June 2023, quash the tax demands arising therefrom, and award the Appellant costs of both this appeal and the proceedings before the Tax Appeals Tribunal.
The Respondent’s Submissions
24. The Commissioner/Respondent opposed the Appeal vide its Statement of Facts dated 5th February 2025, as well as its submissions dated 22nd May 2025.
25. The Commissioner argued that the Tribunal lacked jurisdiction to hear the Appellant’s appeal on the grounds that it was incompetent, having been filed outside the timelines stipulated under both the EACCMA, 2004 (Section 230 thereof), and Section 13 of the Tax Appeals Tribunal Act. As a result, the Respondent submitted that the Tribunal’s judgment, being founded on an appeal filed out of time, is void ab initio and cannot form a lawful basis for an appeal before this Court.
26. The Commissioner submitted that the review decision was made and communicated to the Appellant on 20th June 2023, but the Appellant failed to lodge an appeal within the time prescribed by law. That, although the Appellant claimed it did not receive the decision until it requested a copy on 20th September 2023, the Respondent pointed out that the decision was again re-forwarded on 21st September 2023. That, even if the latter date were to be considered, the Commissioner maintained that the Appellant’s appeal at the Tribunal having been filed on 17th November 2023, was still filed outside the timelines specified under both Section 230(2) of the EACCMA, 2004; and Section 13 (1) and (2) of the Tax Appeals Tribunal.
27. It was further the Commissioner’s position that, contrary to the Appellant’s arguments, the Review Decision in this case was issued on 20th June 2023, which is well within the 30 days’ timeline required under section 229(4) of the EACCMA, 2004.
28. The Respondent argued that the Appellant’s request for review was received on 15th May 2023, and that the Respondent subsequently sought further information on 17th May and 8th June 2023. Upon receiving the necessary information, the Respondent issued its review decision on 20th June 2023, well within the 30-day timeframe set out under section 229(4) of the EACCMA. The Respondent maintained that the review decision was later re-forwarded on 21st September 2023, accompanied by a covering letter referencing the legal basis for the demand.
29. Additionally, the Commissioner disputed the Appellant’s interpretation of Section 107 of the EACCMA, 2004, and submitted that contrary to the Appellant’s assertion, the section provides that a bond can only be cancelled upon discharge of the same and endorsement to that effect made thereon not by effluxion of time (3 years) as claimed by the Appellant.
30. The Respondent submitted that under Section 108 (1) of the EACCMA, 2004, the Appellant, as surety, was deemed to be the principal debtor and could not be discharged from liability due to inaction or delay in enforcement, where its principal(s) have defaulted in their obligations to the Commissioner.
31. The Respondent maintained that there was no legal basis for the Appellant to claim estoppel, legitimate expectation, or reliance on the Limitation of Actions Act, as customs bonds were governed by a specific statutory regime with no limitation period for recovery unless the bonds had been properly discharged. They further submitted that under Regulation 104 of the EACCMA Regulations, where no proof of exportation was submitted, the goods were deemed to have been imported for home consumption, and the surety became liable for the corresponding duty.
32. To support its position, the Respondent relied on judicial decisions including Corporate Insurance Co. Ltd v. Nyali Beach Hotel and Kenindia Assurance Co. Ltd v. First National Finance Bank Ltd, which affirmed that a surety's obligation becomes due upon default and demand, and cannot be defeated by procedural technicalities or lapse of time.
33. The Respondent, therefore, urged this Court to dismiss the appeal with costs.
Analysis and determination.
34. I have carefully considered the Appellant’s Memorandum of Appeal dated 6th September 2024, the Respondent’s Statement of Facts dated 5th February 2025, as well as the written submissions filed by both parties in support of their respective positions. The Court identifies the following as issues requiring determination:
i. Whether the Appellant’s appeal before the Tribunal was filed out of time and was therefore incompetent.
ii. Whether the Review Decision dated 20th June 2023 was issued within the timelines prescribed under Section 229(4) of the EACCMA.
iii. Whether the Respondent was justified in enforcing the subject transit bonds despite the lapse of time.
iv. Whether the demand by the Respondent contravened the doctrines of estoppel, legitimate expectation, or was time-barred under the Limitation of Actions Act.
v. Who should bear the costs of the appeal.
Competency of the Appeal before the Tribunal
35. The Respondent asserts that the appeal lodged at the Tribunal was incompetent, having been filed outside the 45-day period provided under Section 230(1) of the EACCMA, 2004. The Appellant, on the other hand, contends that it did not receive the review decision until September 2023, and promptly acted thereafter.
36. Section 230 (2) of the EACCMA, 2004 provides that: -
“(2) A person intending to lodge an appeal under this section shall lodge the appeal within forty-five days after being served with the decision, and shall serve a copy of the appeal on the Commissioner.”
37. Further, section 13 of the TAT Act provides that a notice of appeal from the decision of the Commissioner is to be lodged at the Tribunal within 30 days from the date of receipt of that decision.
38. In the present case, it is not disputed that the Review Decision is dated 20th June 2023. It is equally common ground that the Appellant’s appeal to the Tribunal was lodged on 17th November 2023. What is in dispute is when the Review Decision was served on the Appellant. While the Respondent argues that the same was issued and served on that date, and only re-forwarded on 21st September 2023, the Appellant’s position is that the Review Decision was served on them on 21st September 2023.
39. From the parties' assertions, it is clear that from whatever angle one looks at it, whether the date of notification of the decision was 20th June 2023 as advanced by the Respondent, or 21st September 2023 as claimed by the Appellant, the filing of the Appeal on 17th November 2023 was obviously outside the timelines prescribed under the law.
40. I note from the record that the Tribunal did not render itself on this question despite the issue of competence of the appeal having been raised by the Respondent as a preliminary point. Additionally, it is also apparent from the record that the Appellant has not, in its submissions in this appeal, responded to the issue.
41. There is no evidence that was adduced by the Appellant at trial, demonstrating that there was any extension by the Tribunal of the period within which to lodge the appeal thereat. Consequently, this Court finds that the appeal before the Tribunal was lodged outside the statutory timelines and was therefore incompetent in that regard.
42. Notwithstanding my finding above, I will nonetheless proceed to consider the remaining issues identified for determination. I will then make a final conclusion on this particular issue in light of the outcomes of the others.
Timeliness of the Review Decision
43. The Appellant contends that the review decision was not rendered within 30 days as required by Section 229(4) of the EACCMA, 2004, and thus should be deemed allowed under Section 229(5).
44. Section 229 (4) of the EACCMA, 2004 provides that: -
“Where the Commissioner does not make a decision within thirty days of receiving an application for review, the Commissioner shall be deemed to have made a decision to allow the application.”
45. In the present case, it is a common ground that the review application was lodged on 15th May 2023. From the record, I note that parties engaged, including through the emails dated 17th May 2023 and 8th June 2023, which culminated in a Review Decision dated 20th June 2023. I also note from the record that even after 20th June 2023, parties still held a joint meeting on 26th September 2023, where it was agreed that the Commissioner was to, “(i)…...share a list of all outstanding bonds with The Monarch Insurance Company and Focus Tax Consultants, and (ii) Recommend lifting of suspension after payment of Kshs. 55,145,501.07”; the Appellant was to, “Pay Kshs. 55,145,501.07 under the OAG query, and (ii) Account for the outstanding bonds Kshs. 2,591,028,084.00.”
46. The Appellant contended that, having applied for review of the Commissioner’s decision on 15th May 2003, Section 229(4) of the EACCMA, 2004, the Commissioner had only up to 16th June 2023 to make a review decision, and not 21st September 2023 as was the case herein. I find this argument not plausible. First, the argument fails to take into account the engagements the parties had post-15th May 2023, the date of the Appellant’s Review application. Secondly, apart from the allegation by the Appellant that the Respondent used the wrong e-mail in forwarding the letter, I find no credible evidence adduced by the Appellant in support of its argument that the Review Decision was issued outside the 30 days authorized under Section 229(4).
47. As indicated above, parties engaged on the issue up to and including 26th September 2023, when they had a meeting in an attempt to resolve the dispute. It is evident from the minutes of that meeting that there was some information that the Appellant was still expected to supply to the Respondent. There is no evidence on record that the Appellant ever supplied this information prior to 17th November 2023, when they filed their appeal at the Tribunal.
48. Section 229 (4) is clear that the 30-day period within which the Commissioner is required to communicate a decision is triggered by either: (i) the receipt of the application for review, or (ii) the receipt of further information required by the Commissioner, whichever is later. In Commissioner of Domestic Taxes v CFAO Agri Limited (ITA No. E113/2024), this Court in a judgment delivered on 30th June 2025, held as follows on the interpretation of Section 229(4) of the EACCMA, 2004: -
“A careful reading of Section 229(4) reveals that the 30-day period within which the Commissioner is required to communicate a decision is triggered by either: (i) the receipt of the application for review, or (ii) the receipt of further information required by the Commissioner — whichever is later. The provision is clearly worded, and in this case, it is undisputed that the Commissioner did request additional information and undertook a site/factory visit, in which the Respondent participated fully.”
49. I adopt the above reasoning in the present case. The Appellant alleged that the Review Decision was erroneously sent to the email address focustaxadvisory@gmail.com instead of the correct address, focustaxadvisiory@gmail.com. However, beyond this assertion, the Appellant did not adduce any concrete evidence to demonstrate that it did not receive the Review Decision within the statutory timelines. Moreover, email correspondence exchanged between the parties after the fact shows that the Appellant did not raise any further objections upon being informed by the Respondent that a response to the review application had been issued via the Respondent’s letter dated 20th June 2023. In an email dated 21st September 2023, Mr. Peter Mochama, the Appellant’s Technical Manager, stated:
“Following our letter of yesterday to KRA, they have responded, saying they did respond to our objection and that the response was addressed to our consultant.
We have since received a copy of the alleged response, and the same is attached…”
50. Even assuming, for argument’s sake, that the letter was initially sent to the wrong email address as claimed by the Appellant, the evidence on record confirms that the decision itself was made on 20th June 2023, well within the thirty-day period stipulated under the law. What is required under Section 229(4) of the EACCMA is that the Commissioner make a decision within thirty days of receiving the application for review, taking into account any subsequent engagements between the parties. That threshold was clearly met in this case.
51. Furthermore, the record shows that there was ongoing communication and engagement between the parties from April 2023, when the tax demand was issued, through to September 2023, when the Appellant claims it became aware of the Review Decision. These engagements included email correspondence as well as physical meetings. In the view of this Court, it would be unreasonable, and indeed contrary to the evidence, to conclude that the decision was made outside the statutory timeframe.
52. On the totality of the evidence, the Court is satisfied that the review decision was made within the timeframes contemplated under Section 229(4). This ground fails.
Enforceability of the Expired Bonds
53. The Appellant challenges the enforcement of the bonds, contending that they were executed over a decade ago, had a maximum validity period of three (3) years pursuant to Section 107 (3) of the EACCMA, 2004, and therefore had expired by the time the Respondent sought to enforce the same.
54. Section 107 (3) of the EACCMA, 2004 provides as follows-
“(3) All bonds required to be given under this Act shall be so framed that the person giving the bond, and any surety thereto, is bound to the Commissioner for the due performance of the conditions of that bond; and any such bond may, unless sooner discharged by the due performance of the conditions thereof, be discharged by the Commissioner on the expiration of three years from the date thereof, but without prejudice to the right of the Commissioner to require fresh security.”
55. The import of the above section is that the lifespan of a customs bond required under the Act is 3 years, but without prejudice to the right of the Commissioner to require a fresh bond. In this case, the security bonds were executed between 2011 and 2013. It therefore follows that the bonds were to automatically stand discharged upon expiry of three years, unless discharged by the Commissioner earlier. Consequently, the 2011 security bonds, assuming 1st January 2011 as the date of issue, would expire in December 2013. The January 2013 bonds expired by December 2015.
56. In the premises, it is the finding of the Court that the bonds were no longer available and unenforceable three years after the date of issue.
57. However, the expiry of the bonds notwithstanding, Section 108(1) of the EACCMA, 2004 deems a surety (the Appellant) as a principal debtor and does not get discharged or have his liability affected. The Section is clear that:
“108. (1) Without prejudice to any rights of a surety to any bond given under this Act against the person for whom he or she is surety, a surety shall, for all the purposes of any bond, be deemed to be the principal debtor and accordingly the surety shall not be discharged, nor his or her liability affected, by the giving of time for payment, or by the omission to enforce the bond for any breach of any conditions thereof, or by any other act or omission which would not have discharged the bond if he or she had been the principal debtor.” [emphasis added]
58. The Appellant has not shown that such discharge was effected in respect of the subject bonds. The Respondent is therefore entitled under Section 108(1) of the EACCMA to recover duty from the surety where there has been default by the principal.
59. This position is well established in law, as was held in Kenindia Assurance Co. Ltd v First National Finance Bank Ltd and Corporate Insurance Co. Ltd v Nyali Beach Hotel, that the liability of a surety arises immediately upon default and demand, and is not defeated by the passage of time unless discharged by the creditor.
On Limitation of Actions/ Doctrines of Estoppel, and Legitimate Expectation
60. The Appellant has argued that the Respondent is estopped from enforcing the bonds and that the claim is time-barred under Section 4(1) of the Limitation of Actions Act.
61. The Court rejects this argument. As pointed out above, the enforcement of customs bonds is governed by a special statutory regime under the EACCMA,2004. Unless a bond has been properly discharged under Section 107(3), no limitation period applies. The Limitation of Actions Act is of general application and does not override express provisions of special legislation.
62. Similarly, the doctrine of legitimate expectation cannot override clear statutory duties. While legitimate expectation protects procedural fairness, it does not confer immunity from compliance with the law. The Appellant has not demonstrated any unequivocal representation by the Respondent that enforcement would not be pursued.
63. The Court also rejects the invocation of estoppel under Section 120 of the Evidence Act. The Appellant, as a party to the executed customs bonds, is bound by their terms and cannot plead estoppel to defeat the statutory mandate of the Commissioner under the EACCMA. The doctrine of estoppel cannot be employed to negate express statutory obligations.
64. In the result, and save for the argument relating to the expiry of the bonds under Section 107(3) of the EACCMA, 2004, which has been allowed, the appeal is generally devoid of merit and is hereby dismissed.
65. As regards costs, I direct that each party shall bear its own costs.
66. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
10TH DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
Mandela………………….…..for the Appellant
Nyapara……………….…..... for the Respondent