The High Court has backed the decision of the Kenya Revenue Authority (KRA) to demand payment of Sh10.3 million in the form of taxes from an agricultural produce exporter, Frigoken Limited.
Justice Francis Gikonyo upheld the findings of the Tax Appeals Tribunal that the taxman properly levied the amount, after conducting a post-clearance audit on the company’s importation of metal caps and steel cans. The audit was for the period September 2017 to September 2022.
The judge said the post-clearance audit conducted on the company’s business in 2022 was lawful and within the statutory timelines.
Initially, the KRA commissioner of customs and border control had asked for payment of Sh155 million in taxes from the firm but reduced the same to Sh10.3 million after the company objected and offered an explanation.
The company had objected to the entire amount stating that it used the imported metal caps and steel cans to manufacture goods for exports and that none of the metal caps and steel cans were used to manufacture goods for domestic markets.
It said the duty imposed was wrong since it had applied for extension of the legal notice that had granted a tax exemption for one year from December 6, 2018 to December 5, 2019. The notice allowed the importation of raw materials/ inputs under the Duty Remission Scheme within 12 months at a duty rate of zero per cent.
However, Justice Gikonyo found that the company imported its goods after expiry of the legal notice and hence could not benefit from the exemption.
“The notice stipulated that the exemption on the imports would apply for 12 months from December 6, 2018, when the notice was issued and end on December 5, 2019. Therefore, there was no promise of exemption after the expiry of the 2018 notice and before the 2020 notice was issued. The 2020 notice does not apply retrospectively,” said the judge.
