The Kenya Revenue Authority (KRA) has agreed to an out-of-court settlement with a sugar importer over the release 40, 000 tonnes of the sweetener.
Darasa Investment Limited, the importer, however, has to clear the Sh2.5 billion tax arrears before the Brazilian sugar is released.
According to a press release from the KRA on Friday, the agreement will be guided by a consent signed by lawyers from both sides.
“Darasa Investment is bound by the consent to seek clearance from relevant government agencies. The clearance is conducted to ensure that the sugar is fit for human consumption before customs allows it to lodge import entry,” read part of the statement.
Darasa Investment will be required to make a Sh547.8 million payment in 90 days if waiver of interest and penalties is not granted as per the East African Community Customs Management Act.
“If the waiver is not granted within the 90 days, the money will be paid to the KRA,” the authority, adding that upon completion of the payments, the sugar consignment will be released.
The settlement ended prolonged court battles between the KRA and Darasa Investment over the imported Brazilian sugar.
The dispute had been pending at the Supreme Court where the importer had been challenging a Court of Appeal decision against its importation of the sugar duty free.
The Court of Appeal in Mombasa allowed the appeal by the KRA and set aside a decision by the High Court which ruled that the sugar imported by Darasa Investment was be cleared duty free.
Appellate Judges Alnashir Visram, Wanjiru Karanja and Martha Koome unanimously said the appeal by the KRA had merit before setting aside orders by High Court Judge Eric Ogola.
The judges also ruled that there was no evidence that the taxman subjected Darasa Investments to discrimination since there was nothing to show that documents by other importers had inconsistencies.
They further said they were in disagreement with arguments that alternative remedies only apply to matters relating to the issue of quantum.
“It is clear that the respondent examined shipping documents by Darasa Investment and that inconsistencies were discovered and they were asked to shed light. Whether the decision by the KRA was right or wrong was not to be discussed by the court,” the ruling stated.
According to the judges, the contention by Darasa Investment, that the authority did not give it an opportunity to be heard, "holds no water".
The judges also ruled that the issue of legitimate expectation by Darasa Investment could not arise.
The High Court had termed the decision by the KRA to levy duty as unlawful.
Justice Ogola also ruled that he was satisfied that the vessel that carried the consignment from Brazil could not dock at the Port of Mombasa due to its size hence the sugar had to be transhipped in Dubai.
Darasa Investments had the KRA'ds decision to levy duty on its sugar consignment as irrational and unreasonable.