The Kenya Revenue Authority (KRA) has lost a bid to close down Nanyuki-based Mount Kenya Breweries over a Sh934 million tax dispute and alleged use of counterfeit excise stamps.
The Court of Appeal rejected KRA’s application to shut down the factory which manufactures Sparkler Vodka, saying the taxman can still pursue the tax arrears while the company is operating.
KRA had argued that the factory was benefiting from use of fake excise stamps, denying the government revenue and promoting unhealthy competition within the sector.
A bench of three judges said in a ruling that although the taxman had an arguable appeal, the company should be allowed to remain open, pending the determination of the case.
“We do not agree with the argument proffered by the applicant (KRA) that the intended appeal will be rendered pointless and the respondent is likely to continue benefiting from use of counterfeit excise stamps hence leading to loss of revenue and unhealthy competition within the sector,” Justices Daniel Musinga, Sankale ole Kantai and Helen Omondi said.
The judges noted that while ordering the reopening of the factory in May last year, the High Court stated that the orders granted did not in any way stop KRA from pursuing any outstanding and future tax liabilities from the company.
The brewer through its director Solomon Wahome opposed the application, arguing that it will lose business income, should the factory be closed.
The KRA raided the factory on April 9, 2021, and allegedly found the company engaging in unlawful production of alcoholic drinks contrary to the provisions of the Excise Duty Act.
The company moved to court, saying officials from KRA raided the premises without notice and conducted a search after which they claimed to have discovered approximately 16,600 bottles of its product allegedly affixed with unverified excise stamps.
The company said it was facing significant loss of income and it was unable to fulfil its financial obligations totaling more than Sh350 million to its financiers and creditors and was unable to meet other recurrent expenditure.
“On the other hand, the applicant (Mount Kenya breweries) is correct that its continued operation is beneficial to the public because it will pay taxes on whatever revenue it generates,” the High Court ruled.