Sugar importer in Sh2.5bn tax dispute says he has complied with KRA demands

A sugar importer at the centre of Sh2.5 billion tax dispute in court has complied with Kenya Revenue Authority (KRA) directives on the storage of 40,000 metric tonnes of Brazilian brown sugar to be offloaded from a ship to a private warehouse but has protested some of the conditions.

Darasa Investments Limited, the sugar importer, in a letter to KRA lawyer says that in conjunction with JB Maina Warehouse where the court directed the sugar to be offloaded, records of the consignment will be maintained.

Through lawyer Dennis Mosota, the company says the warehouse shall provide 24-hour police security for the sugar at its own expense and CCTV surveillance covering both the interior and exterior.

“The warehouse shall demarcate a specified area acceptable to KRA for storage of the subject sugar. The portioned area shall be free from any other goods belonging to other clients,” says Mr Mosota in the letter.

However, Mr Mosota says a letter to the company dated January 11 from KRA authored by a Mr Njiraini gives a false impression that the taxman is desirous of complying with court orders.

Mr Mosota says purporting to transfer the obligations of the taxpayer to provide security for payment of duty to a third party is part of time-buying schemes to frustrate the taxpayer.

“The directive by Mr Njiraini that the warehouse executes a security bond equivalent to the taxes in dispute has no basis in law,” said Mr Mosota in the letter.

He further states that there is no law requiring a warehouse to meet the importers obligations and that the point was argued in court and disallowed.

The lawyer says the company shall take legal action to ensure full compliance with the court orders and to protect the taxpayer from financial consequences of KRA actions.

At the same time, KRA has filed a Notice of Appeal against a decision in which it lost a bid to have the sugar offloaded from a ship to a customs bonded warehouse.
KRA said that being dissatisfied with the decision by Justice Eric Ogola on January 8, it intends to appeal against the entire ruling.

Justice Ogola had after delivery of the ruling declined to suspend (stay) it for seven days to allow KRA to file an appeal.

The judge had directed the sugar to be offloaded to JB Maina Warehouse as per the court order issued on December 27 in favour of Darasa Investment Ltd, the sugar importer.

In its suit, Darasa Investments Ltd says the decision by KRA through its letter to levy full duty to its sugar was illegal and unfair as the Treasury Cabinet 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 said the decision by KRA to levy full duty on its sugar consignment was based on irrelevant considerations, considering that it had satisfactorily answered all questions in regard to when the consignment was loaded in Brazil.

In her affidavit, KRA chief manager in charge of Document Processing Centre Ms Rosemary Mureithi says on the date of entry of consignment, the commissioner customs services issued an exemption letter addressed to the Port Operations office and copied to Darasa Investments Ltd.

She said according to the letter, it granted exemption of the consignment subject to the company answering to the descriptions and conditions under Gazette Notice 4536 dated May 11 and No 9802 dated September 29 last year.

Parties are expected to highlight their submissions on January 23.

Ms Mureithi said documents presented by Darasa Investments Ltd for clearance of the consignment were analyzed and scrutinized for conformity and adherence to the Gazette Notices for clearance and release.

She says that a number of discrepancies were found and as a result processing of the consignment was stopped and clarification sought from the company.

Among the discrepancies Ms Mureithi pointed in her affidavit include a bill of lading indicating the consignment was loaded onto the vessel on October 17 last year from United Arab Emirates to discharge at the Port of Mombasa was outside the Gazette Notice period of August 31 2017.

She further said that a certificate of origin from Dubai Chamber of Commerce that was issued on October 19  last year outside the Gazette Notice period.

“The import declaration form which is the intention to import indicates the country of supply as UAE,”said Ms Mureithi further stated.
Ms Mureithi said KRA through a letter dated November 20 last year sought clarification from Darasa Investment Ltd on why they wanted the consignment cleared under duty free while it did not meet the Gazette Notice threshold for duty free.

She added that the company did not explain why they could not obtain a certificate of conformity from Brazil where there are Kenya Bureau of Standards agents and could have been easily issued.

“The applicant also did not satisfactorily explain how comes the certificate of origin was issued by UAE if indeed the sugar originated from Brazil,” said Ms Mureithi.