KRA loses Sh2.5bn tax claim from sugar importing firm

The Port of Mombasa, a regional hub for imports and exports in the region. FILE PHOTO | NMG
The Port of Mombasa, a regional hub for imports and exports in the region. FILE PHOTO | NMG 

The Kenya Revenue Authority has lost its claim for Sh2.5 billion tax from a consignment of imported Brazilian sugar.

Justice Eric Ogola in a judgment said the sugar, imported by Darasa Investment Ltd, was entitled to be cleared duty-free by the taxman and termed the decision by KRA to levy duty on it as unlawful.

In his 62-page decision, the judge said the court was satisfied that the sugar was loaded at a port in Brazil between May 12 and August 31 destined to Mombasa port as per the conditions set in a Gazette Notice.

Justice Ogola further ruled that he was satisfied that the vessel that carried the consignment from Brazil could not dock at the Port of Mombasa due to its size, hence the sugar had to be trans-shipped in Dubai.

He said KRA discriminated against Darasa Investment Ltd when it demanded that it pays the tax for the 40,000 metric tonnes of sugar yet other importers of the commodity did not face any hurdles.


“The respondents (KRA) did not give any reasons for their decision. It should have offered proof that the applicant (Darasa Investment Ltd) did not give satisfactory response,” said Justice Ogola.

He wondered on what grounds KRA cleared other importers and denied Darasa Investments Ltd the opportunity to import the sugar duty free.

The judge further ruled that the company legitimately expected not to pay Sh2.5 billion.

The court further ruled that it had jurisdiction to hear the case and that KRA should have raised the issue (of jurisdiction) at the onset of the proceedings, not during submissions.

Through lawyer Ken Ogeto, KRA said it would appeal the decision at the Court of Appeal.

Darasa Investments Ltd, through lawyer Fred Ngatia and Dennis Mosota, had termed a decision by KRA to levy duty on its sugar consignment as irrational and unreasonable.
They said the action by KRA was a case of a public authority going at any length to deny it a benefit conferred alongside others.

“Whereas an individual may have liberty to do what he wants, public authorities should never have an axe to grind with a citizen; that is not their domain,” said Mr Ngatia.

Mr Ngatia told the court that it is beyond any argument that the sugar was loaded at the Port of Brazil, within the stipulated period and bought by Darasa Investment Ltd.

The firm said the decision by KRA through its letter to levy full duty to its sugar was illegal and unfair as the Treasury secretary had exempted it from provisions of Gazette No 4536 dated May 12 as amended by Gazette Notice No 9802 dated October 4.

Darasa Investment Ltd wanted the court to quash the decision by KRA to levy the Sh2.5 billion tax on its sugar consignment.