Kenya Breweries Ltd has won a battle against the Kenya Revenue Authority over the taxman’s bid to classify fermented apple fruit concentrate, a raw material used in the manufacture of cider as an alcoholic beverage.
High Court judge David Majanja upheld a decision of the Tax Appeals Tribunal that found the apple concentrate, which is used in the manufacture of KBL’s Tusker Cider, cannot be classified in the same category as beverages, spirits and vinegar, to attract higher import duty.
KRA said it did a sample test of the concentrate and found it contained alcoholic strength by volume 14.06 percent and as such, considered it to be fermented alcoholic concentrate classified in HS Code 2206.00.90 of the EAC Common External Tariff.
“The tribunal correctly analysed the provisions of the EAC Common External Tariff (CET), the explanatory notes, General Interpretation Rules (GIRs) and evidence on record to come to the conclusion that the apple concentrate was a raw material for the manufacture of cider, an alcoholic beverage,” the judge said.
KBL said the alcoholic fermented apple was imported for manufacturing of its Tusker Cider brand and the taxman had demanded extra taxes of Sh71.5 million after classifying the import under HS Code 2206.00.90.
The brewer said the product is widely used in industry to make beverages and the removal of water before shipping reduces the costs of transport, handling and storing.
The company maintained that the product is used in the manufacture of beverages but not a beverage in itself and it therefore cannot be classified under the tariff proposed by KRA.
The KRA insisted that alcoholic content, which was at 14 percent, is a critical factor in classifying tax tariffs.
Justice Majanja said the argument that since both the apple concentrate and the alcoholic fermented apple plus had the same alcoholic content volume then they both belonged to the same tariff code, cannot hold.
The judge added that KBL discharged its burden of proof by demonstrating that KRA was wrong in its classification by showing that the raw material was a concentrate, not a juice and as such, the chapter which the commissioner relied on cannot apply.
