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Inside Bidco, KRA Sh1.3bn tax war

Monday, July 02, 2012 — updated on December 15, 2020 - 5 min read

KRA Commissioner-General John Njiraini (left) and Bidco Managing Director Vimal Shah (right)

Corporate Kenya will be closely watching as the court hears an epic legal duel pitting the taxman against consumer goods manufacturer Bidco Oil.

The Sh1.3 billion case in which Bidco is contesting its right to be charged tax as provided for in law, moves to full hearing in coming weeks after the court cleared a hurdle that the Kenya Revenue Authority had erected in Bidco’s way through a demand that the firm first deposits a bank guarantee for the disputed amount.

That order effectively removed the agency notices KRA had issued against Bidco’s bankers and distributors of its products.
Bidco’s contention was that before the Commissioner-General could intervene in respect of the erroneous tax valuation, the Commissioner of Customs had, in violation of the East African Community Customs Management (EACCMA) Act, issued notices to the firm’s bankers — Standard Chartered, City Bank, Barclays Bank, Equity Bank and Kenya Commercial Bank.
The agency notices were also issued to leading distributors and marketers of Bidco’s cooking oil, fats and soaps — Nakumatt Holdings, Tusker Mattresses, Uchumi, Ukwala Supermarkets and the Commissioner of Domestic Taxes.
Bidco’s managing director, Vimal Shah, argues in a sworn affidavit that the notices were issued before the expiry of 45 days provided for in law – effectively denying the company the right of appeal to the Customs and Excise Appeal Tribunal against the Commissioner of Customs’ demand.
Mr Shah argued that the company was dissatisfied with the decision of the Commissioner of Customs Services to demand extra revenue of Sh1.3 billion on the Sh780 million initially assessed by a team of technical experts.
Bidco pleaded with the tax tribunal to interpret the statutory regime and parameters of determination of value and assessment of duty as provided for under various sections and adjustments of the EACCMA Act.
“The demand for tax by the Commissioner of Customs Services in the sum of Sh1.3 billion should be set aside and the tribunal to find that no tax is payable,” pleaded Bidco in its appeal of a High Court decision that the taxman had acted properly in assessing the taxes due.

The dispute between Bidco and KRA goes back to 2009 when the taxman assessed the firm’s imports duty bill and established that it was in arrears of Sh702 million. On September 16, 2009, KRA wrote to the company and demanded payment of the tax arrears.
Bidco moved to court seeking orders to have KRA restrained from making the demand and also sought a review of the decision to charge the company a hefty tax penalty.
Mr Shah said Bidco was willing to pay the tax due but wanted the court to determine whether KRA acted within the narrow confines of the law to compute the tax arrears.
On September 25, 2009, the Commissioner-General wrote to Shah informing him that he would set up a team of technical experts to look into the dispute. The firm was informed by the taxman that it could only suspend the agency notices if Bidco paid half of the Sh703 million initially demanded as security pending the findings of the team of experts.

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Inside Bidco, KRA Sh1.3bn tax war

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