Kenya judge hands Bidco relief in case with taxman

Bidco Oil on Tuesday won relief from the taxman after a judge allowed its petition to be heard without depositing full security for disputed tax dues.

Mr Justice David Majanja ruled that the company deposits a Sh200 million guarantee instead of the Sh1.3 billion demanded by the taxman, pending the hearing of a petition in which the edible oil manufacturer is disputing the computation of taxes for goods imported in 2008.

Mr Majanja further granted Bidco’s plea for conservatory orders restraining KRA or its agents from levying any distress charges against the firm’s property, including its bank accounts.

The order effectively freezes the agency notices that KRA issued against Bidco’s bankers and suppliers in April in relation to the demand for the duty.

Mr Majanja said his decision on the matter was guided by the need to balance the petitioner’s right to be heard in a court of law, especially in a matter involving enforcement of a fundamental right against KRA's and the public interest in securing collection of taxes.

“In balancing the right of the petitioner to agitate these proceedings and the responsibility of the respondent to collect taxes, I hereby order that a conservatory order be granted to the petitioner barring KRA, the Commissioner-General and Commissioner of Customs from purporting to levy distress or levying distress against the property of the petitioner including his bank accounts,” Mr Majanja ruled.

Legal experts argued that although the ruling had offered Bidco a good measure of relief, it had preserved the special status that KRA enjoys within the litigation process in matters relating to tax disputes.   

Bidco moved to court in April after the taxman hit it with a Sh1.3 billion demand in taxes, interest, and penalties, and backed the move with the issuance of agency notices to the company’s bankers to collect the taxes.

KRA had moved into action after the High Court dismissed Bidco’s application for a judicial review seeking to challenge the findings of a team of experts who had assessed the tax due as Sh780 million.

Bidco reckons that KRA’s demand and collection of taxes in the manner intended not only contravenes its fundamental rights and freedoms as protected by the Bill of Rights, but also that collection of taxes in the circumstances of the case is in breach of the Constitution.

Through its lawyer Ochieng Oduol, the petitioner contends that KRA’s enforcement and collection of taxes as attempted in April will prejudice its right to administrative review under the East Africa Community Customs Management Act of 2004.

Disputed matter
Mr Oduol told Justice David Majanja that Bidco is a large taxpayer that contributes substantially to the exchequer and has been paying its taxes save for the taxes due in the disputed matter and should therefore not be prevented from exercising its right to be heard in the constitutional court by a demand for security.

Bidco had argued that affirming KRA’s demand for security as a pre-condition for agitation of fundamental rights would amount to upholding an illegality and that the petitioner should not be burdened with an order for security when seeking enforcement of its fundamental rights.

Mr Oduol argued that Article 22 of the Constitution gives the petitioner an absolute right to appear before a court of law claiming denial, violation and infringement or threat to a right or fundamental freedom and the court should not in such a case impose any conditions on the exercise of this right by imposing security demands.

Bidco maintained that an order for security should not be issued because the petition raises serious issues of law and the amount demanded substantial.