NAIROBI: The Kenya Revenue Authority (KRA) has lost a Sh662 million tax demand battle against a Mombasa-based edible oil manufacturer.
The taxman suffered the blow after Customs and Excise Appeals Tribunal ruled that Kapa Oil Refineries Ltd did not under declare customs value on its imported crude palm oil between 2008 and 2013.
“Having considered the pleadings, evidence adduced, submissions and the relevant legal provisions, the tribunal finds that the appeal has merits and is allowed,” the five-member tribunal composed of Josephine Kemunto, Moses Bonyo, Isaac Litali, John Mathenge and Dickson Poloji explained in their ruling.
The Mombasa-based company had moved to the tribunal lamenting that the Kenyan Caesar slapped it with a Sh662.1 million demand on October 17, 2013, adding that it was unrealistic and not founded to the customs valuations law.
The tribunal heard that the deal that culminated in the tax demand had already been paid up in full as was required by the agreement by the two companies. Kapa Oil was importing crude palm oil products from Josovina commodities PTE Limited and it was required to pay up deposits within seven days.
The company through its Lawyer Boniface Muumbi argued that the pay was not a part of the custom values it had declared. Mr Muumbi said that the demand for extra taxes was vague and was only based on general statements.
“The respondent (KRA) referred to Generally Acceptable Accounting Principles (GAAP) which is not a consideration provided for in the law on customs valuation. It does not disclose how deposits payable to the appellant (Kapa) to the supplier or credit noted issued by the supplier to the appellant affect the transaction value or which GAAP principles have been breached,” the tribunal heard.
In response, Kenya Revenue Authority argued that the demand it made in 2013 was procedural and would be enforced within the law. The taxman held that Kapa had deliberately declared wrong custom values, saying that the company ought to pay in full the demand.
The tribunal heard that the company had filed wrong commercial invoice value of the imported oil and did not declare a part of the monies paid to the foreign firm.
Kenya Revenue Authority had assessed that Kapa owed it close to Sh14 million in terms of import duty, close to Sh560 million in terms of Value Added Tax and further Sh79 million in terms of import declaration fees.
