Kenya Revenue Authority v Export Trading Company Limited [2020] eKLR Case Summary

Court
Court of Appeal at Nairobi
Category
Civil
Judge(s)
Ouko (P), Gatembu, Sichale, JJ.A
Judgment Date
October 23, 2020
Country
Kenya
Document Type
PDF
Number of Pages
2

Case Brief: Kenya Revenue Authority v Export Trading Company Limited [2020] eKLR


1. Case Information:
- Name of the Case: Kenya Revenue Authority v. Export Trading Company Limited
- Case Number: Civil Appeal No. 180 of 2019
- Court: Court of Appeal at Nairobi
- Date Delivered: 23rd October 2020
- Category of Law: Civil
- Judge(s): Ouko (P), Gatembu, Sichale, JJ.A
- Country: Kenya

2. Questions Presented:
The central legal issues in this case include:
- Whether the Kenya Revenue Authority (KRA) acted within its legal authority when it demanded additional taxes from the Export Trading Company Limited (the respondent) four years after the initial importation.
- Whether the KRA's actions infringed upon the respondent's rights to fair administrative action under Articles 40 and 47 of the Constitution of Kenya.

3. Facts of the Case:
The appellant, Kenya Revenue Authority (KRA), sought to recover Kshs 378,016,680 from the respondent, Export Trading Company Limited, for unpaid taxes related to rice imports from countries other than Pakistan between 2008 and 2009. The respondent challenged this demand through a constitutional petition, arguing that the KRA's actions infringed on its constitutional rights. The initial judgment favored the respondent, leading to KRA's appeal.

4. Procedural History:
The respondent filed a constitutional petition that was determined in its favor by Wilfrida Okwany, J., on 9th January 2019. The KRA subsequently appealed the decision, citing several grounds, including the legality of its post-clearance audit and the reasonableness of its actions in demanding additional taxes after a substantial delay.

5. Analysis:
- Rules: The relevant statutes include Section 235 of the East African Community Customs Management Act (EACCMA), 2004, which allows for post-clearance audits within five years of importation, and Article 47 of the Constitution, which guarantees the right to fair administrative action.
- Case Law: The court referenced the case of Krish Commodities Limited v. Kenya Revenue Authority [2018] eKLR, which established the necessity for KRA to conduct audits and make tax demands in a reasonable and fair manner. The court also cited Republic v. Kenya Revenue Authority Exparte Cooper K-Branis Limited [2016] eKLR, which emphasized the need for KRA to monitor its tax assessment instruments regularly.
- Application: The court found that KRA's demand for taxes four years after the initial assessment lacked a reasonable explanation and was therefore arbitrary and capricious. The court noted that the KRA failed to respond to the respondent's inquiries about the applicable tax rates, leading to a legitimate expectation on the part of the respondent that the assessed duties were correct.

6. Conclusion:
The Court of Appeal upheld the lower court's ruling, concluding that KRA's actions were irrational and constituted a violation of the respondent's rights to fair administrative action. The appeal was dismissed with costs to the respondent, reinforcing the principle that public authorities must act fairly and reasonably in the exercise of their powers.

7. Dissent:
There were no dissenting opinions noted in this case.

8. Summary:
The Court of Appeal affirmed the judgment of the lower court, finding that the KRA's demand for taxes after a significant delay was unreasonable and violated the respondent's constitutional rights. This case underscores the importance of fair administrative processes and the need for tax authorities to provide timely and accurate information regarding tax obligations.

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