Mastermind loses Sh517m tax dispute against KRA

Cigarette maker Mastermind Tobacco has suffered a blow after a tribunal upheld a decision requiring the company to pay Sh517 million to Kenya Revenue Authority (KRA) for diverting the export cigarette to the local market.

A five-member tribunal ruled that the manufacturer failed to prove that it exported 15 consignments of cigarettes to Burundi as KRA maintained the export stamps engraved on the products were fake.

Cigarettes meant for export are exempted from certain local taxes, offering firms divesting such goods to the domestic market higher margins or room to offer discounts.

The KRA said it assessed the company’s value-added tax of Sh90 million and Excise Duty of Sh427.5 million on account of sales of cigarettes classified as exports, hence zero-rated.

But Mastermind did not provide proof of exports for the consignments, meaning that the cigarettes were dumped in the local market.

“Further, we have examined the export delivery notes presented before us by the Appellant (Mastermind) and note that in all of them the goods were received at destination on the same date of dispatch from Nairobi and before rotation at the Uganda Malaba border.

“This makes it impractical for the goods dispatched to arrive in Burundi the same day, hence affirming the respondent’s assertion that the consignment in question in this appeal was not exported,” said the tribunal.

The tribunal said it was not persuaded by the Mastermind’s claim that once the trucks were stuffed, loaded and left its premises, the goods ceased to be in its power and became the responsibility of the customer.

“We note that exportation of goods is a process, which requires the appellant to adduce evidence of documents acquired and or presented at every stage of the process — from the country of origin to the transit state and finally at the country of destination,” said the tribunal.

Evidence presented before the tribunal was that the police raided premises in Busia in November 2016 and impounded 419 cartons of Supermatch cigarettes for export.