KRA loses Sh2.5bn tax bid on Brazilian sugar
Lawyer Ken Ogeto defends the Kenya Revenue Authority's decision to impose duty on sugar imported by Darasa Investment Ltd, at the Mombasa High Court on February 14, 2018. The agency lost the case. PHOTO | PHILIP MUYANGA | NATION MEDIA GROUP
What you need to know:
- Judge Ogola ruled that the company legitimately expected not to pay duty.
- Judge Ogola said KRA discriminated Darasa Investment Ltd when it demanded that it pays tax for the 40,000 metric tonnes of sugar.
The Kenya Revenue Authority (KRA) has lost a bid to levy a Sh2.5 billion tax on imported Brazilian sugar.
Justice Eric Ogola said the sugar, imported by Darasa Investment Ltd, is entitled to be cleared duty-free by the taxman and termed the decision by KRA to levy duty as unlawful.
The judge said the court was satisfied that the sugar was loaded from Brazil between May 12 and August 31 destined for the Port of Mombasa as per the requirements of a Gazette notice.
DISCRIMINATION
Justice Ogola further 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 sail to Dubai for trans-shipping.
He said KRA discriminated Darasa Investment Ltd when it demanded that it pays tax for the 40,000 metric tonnes of sugar, yet other importers of the commodity did not face the same.
“The respondents (KRA) did not give any reasons for their decision; it should have offered proof that the applicant (Darasa Investment Ltd) did not give a satisfactory response,” Justice Ogola ruled.
He asked on what grounds KRA cleared other sugar importers and denied Darasa Investment Ltd the opportunity to import the sugar duty-free.
APPEAL
The judge further ruled that the company legitimately expected not to pay Sh2.5 billion duty, hence expecting it to pay was unfair.
The court further ruled that it had jurisdiction to hear the case and that KRA should have raised the issue (of jurisdiction) at the onset of the proceedings, not during submissions.
Lawyer Ken Ogeto for KRA said his client will appeal against the decision.
Darasa Investment Ltd, through lawyers Fred Ngatia and Dennis Mosota, had termed the decision by KRA to levy duty on its consignment irrational and unreasonable.
“Whereas an individual may have liberty to do what he wants, a public authority should never have an axe to grind with a citizen,” Mr Ngatia said.
SUGAR PRODUCTION
Mr Ngatia told the court that it was beyond any argument that the 40,000 metric tonnes of sugar was loaded at the Port of Brazil within the stipulated period and purchased by Darasa Investment Ltd.
Darasa Investment Ltd said Treasury Cabinet Secretary had exempted it from provisions of Gazette Notice No 4536 dated May 12 as amended by Gazette Notice No 9802 dated October 4.
Through Mr Ogeto, KRA told the court in submissions that after a scrutiny of the importer’s documents, it noted inconsistencies that suggested the sugar was not loaded onto a vessel in Brazil headed to Kenya.
Mr Ogeto further argued that there was inconsistency relating to the date the sugar was produced.
“It is illogical for the applicant to contend the sugar was shipped from Brazil in July yet in their documents it was produced in September; this was a valid legitimate request for clarification,” Mr Ogeto argued.
