The concessionaire said in the petition filed before the High Court that it was apprehensive that KRA would attach its accounts and paralyse its operations.
The company wants the court to temporarily suspend a decision of the Tax Appeals Tribunal directing it to pay Sh1.6 of unpaid tax.
Through Philip Nyachoti, RVR said it will be exposed to enormous and substantial financial loss and damages if the decision is not suspended.
Rift Valley Railways (RVR) has rushed to the High Court to block the Kenya Revenue Authority (KRA) from freezing its accounts or seizing its assets to recover tax bill of Sh1.6 billion.
The concessionaire said in the petition filed before the High Court that it was apprehensive that KRA would attach its accounts and paralyse its operations.
The company wants the court to temporarily suspend a decision of the Tax Appeals Tribunal directing it to pay Sh1.6 of unpaid tax.
Through Philip Nyachoti, RVR said it will be exposed to enormous and substantial financial loss and damages if the decision is not suspended. Mr Nyachoti added that the company’s operations will be crippled completely, yet Covid-19 has slowed down or paralysed businesses worldwide.
“The applicant (RVR) is willing to abide by any reasonable orders and conditions as to security guarantee by providing a suitable bank guarantee for a reasonable sum taking into account the prevailing situation occasioned by the Covid-19 pandemic,” he submitted.
In September, the Tribunal chaired by Mahat Somane dismissed the appeal by the concessionaire stating that some of the items imported by RVR, among them locomotives and diesel engines, were not tax exempt as alleged.
“This therefore leaves room for one reasonable conclusion; that the Appellant (RVR) was not granted remission in respect of the locomotives and as such the taxes as assessed by the Respondent (KRA) are properly due and payable by the Appellant,” the Tribunal ruled.
KRA told the tribunal that it did an analysis of the company’s business between 2011 and 2016 in respect of customs duty, value added tax, withholding tax and withholding VAT. The taxman later in 2017 issued an assessment notice for taxes amounting to Sh1.69 billion.
But the company argued that the Tribunal misapplied the law by holding that RVR was not granted full exemption of taxes in the importation of capital goods.
Mr Nyachoti said there was documentary evidence to prove that the Treasury CS approved the waiver on August 15, 2011.
He said it was therefore wrong for the tribunal to find that Treasury did not grant exemption “The tribunal erred by finding that the appellant (RVR) is bound by the respondent’s assessment on undervaluation of freight charges for locomotives and diesel engines despite the same having been exempted by the national treasury,” he said.
KRA had accused the company for undervaluing freight charges on six imported locomotives in December 2014 and fraudulent remission of VAT on importation of tamping and ballast distributing machines.
The tribunal ruled that the failure to withhold tax as required was a breach of the law on the part of the RVR, a move that was occasioned by its miscomprehension of the effects of the repeal of Section 25A of the VAT Act.
According to the Tribunal, a perusal of the documents showed that some items the company claimed were exempted had been left out by the Treasury.
“Accordingly, we find that the taxes assessed by the Respondent in respect of the locomotive, spare parts, diesel engines, train simulator and the tamping machine are owing to the public purse and should be settled by the Appellant,” the Tribunal ruled.
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