Court orders sugar trader to pay taxman billions

Offloading sugar at the Mombasa port. FILE PHOTO | NMG
Offloading sugar at the Mombasa port. FILE PHOTO | NMG 

A sugar importer will have to pay Sh2.5 billion in tax after the Kenya Revenue Authority (KRA) succeeded in its appeal against a decision allowing him to import 40,000 metric tonnes of Brazilian sugar duty free.

The Court of Appeal in Mombasa allowed the appeal by KRA and set aside the decision by the High Court which ruled that the sugar, imported by Darasa Investment Ltd, was entitled to be cleared duty free.

Appellate Judges Alnashir Visram, Wanjiru Karanja and Martha Koome unanimously said the appeal by KRA had merit before setting aside the orders issued by High Court Judge Eric Ogola.

No discrimination

They also ruled that there was no evidence that KRA subjected Darasa Investments Ltd to discrimination since there was nothing to show that documents by other importers had inconsistencies.


They further said that they were in disagreement with arguments advanced that alternative remedies only apply to matters relating to the issue of quantum.

“It is clear that the respondent examined shipping documents by Darasa Investments Ltd, inconsistencies were discovered, they were asked to shed light by respondent, whether the decision by KRA was right or wrong, it was not to be discussed by the court.”

According to the Appellate Judges, the contention by Darasa Investment Ltd that it was not given an opportunity by KRA to be heard ‘holds no water’.

Beyond jurisdiction

They further noted that Justice Ogola acted beyond his scope of jurisdiction when he had noted that there were matters disputed between the parties.

“Judicial review is not available when facts are disputed,” said Justice Koome who read the judgment on Wednesday on behalf of her colleagues.

The Judges also noted that inconsistencies regarding on when the sugar was loaded into the vessel were not resolved.

They also ruled that the issue of legitimate expectation by Darasa Investment Ltd could not arise.

During the hearing of the appeal, Darasa Investment Ltd said a Gazette Notice amendment required it to establish that the consignment was loaded into a vessel destined to the port of Mombasa within a specific period.

Through lawyers Fred Ngatia and Dennis Mosota, Darasa Investments Limited said the period specified was between May 11 and August 31 last year.

Mr Ngatia told court that the bill of lading showed that the 40,000 metric tonnes of sugar was loaded at the port of Santos, Brazil and the port of discharge was Mombasa.

He argued that instead of asking whether the consignment was loaded into a vessel for delivery in the country within the specified period, KRA engaged on irrelevant considerations and failing to consider relevant criteria.

The court also heard that the dispute between the parties could only be litigated as a public law issue at the High Court and not at the Tax Appeals Tribunal.

Through lawyers Gershom Otachi, David Ontweka and Carol Mburugu, KRA argued that Justice Ogola erred in law by adjudicating the issue when he did not have jurisdiction.

They further argued that the High Court improperly exercised jurisdiction before exhausting of alternative remedies.

Mr Otachi told the court that the sugar importer should have gone to the tribunal to seek a review of KRA’s decision as provided under Tax Appeals Act.

According to KRA, Justice Ogola erred in sitting on appeal over its decision on perceived errors of facts and also holding that Darasa Investments Ltd could have legitimate expectation of duty free clearance against the law.

KRA further argued that Darasa Investment Ltd failed to show that KRA did not discharge their duty to it or they abused their powers in seeking to have them pay duty.

The High Court had ruled that 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 as unlawful.

Justice Ogola also 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 transshipped in Dubai.

Darasa Investments Ltd had termed a decision by KRA to levy duty on its sugar consignment as irrational and unreasonable.