Judgment summary
The Tribunal allowed an appeal by Equator Bottlers Limited against a Commissioner's decision disallowing an offset of excise duty paid on plastic preforms against excise duty payable on its finished bottled beverages. The Tribunal first rejected the Commissioner's preliminary objection that the appeal was out of time, holding that the Notice of Appeal was lodged within the thirty-day period computed under Section 77(2) of the Tax Procedures Act, excluding weekends and public holidays. It further held that the Commissioner was not justified in declining to apply the Tribunal's earlier decision in Kenafric Industries Limited on the mere pendency of a High Court appeal. On the merits, the Tribunal held that preforms constitute raw materials used in the manufacture of the Appellant's excisable finished goods under Section 14(1) of the Excise Duty Act, and that the Respondent had erred in disallowing the relief.
Background
The Appellant, Equator Bottlers Limited, is a limited liability company incorporated in Kenya, whose principal business is the manufacture of bottled water and other non-alcoholic beverages at its plant in Kisumu (paras 1-2).
The Appellant purchases plastic preforms from Coca-Cola Beverages Kenya Limited, which it blow-moulds into plastic bottles for packaging its beverages. Between April and June 2025, the Appellant offset the excise duty paid on the preforms against the excise duty payable on its finished beverages (para 3).
Upon reviewing the Appellant's excise returns, the Respondent formed the view that preforms are packaging materials, not raw materials, within the meaning of Section 14(1) of the Excise Duty Act. By a Notice of Assessment dated 11th September 2025, the Respondent disallowed the relief claimed and demanded Kshs. 18,445,951.00, comprising principal excise of Kshs. 17,019,636.00, penalty of Kshs. 850,982.00 and interest of Kshs. 575,333.00 (para 4).
The Appellant objected by a letter dated 23rd October 2025, lodged 24th October 2025. The Respondent issued an Objection Decision dated 22nd December 2025 confirming principal excise duty of Kshs. 17,019,636.00 (para 5). The Appellant lodged a Notice of Appeal at the Tribunal on 2nd February 2026 (para 6).
Core dispute
The Appeal distilled into three issues: whether there was a proper appeal before the Tribunal, turning on whether the thirty-day period for lodging a Notice of Appeal under Section 13(1) of the Tax Appeals Tribunal Act is computed in calendar days or excluding weekends and public holidays under Section 77(2) of the Tax Procedures Act; whether the Respondent was justified in declining to apply the Tribunal's earlier decision in Kenafric Industries Limited v Commissioner of Domestic Taxes on the ground that it was subject to a pending appeal before the High Court; and whether the Appellant was entitled to offset excise duty paid on preforms against excise duty payable on its finished beverages under Section 14(1) of the Excise Duty Act (para 92).
The Appellant contended that preforms are raw materials which undergo a substantive manufacturing process to become bottles, an integral part of the excisable good, being 'bottled or similarly packaged waters and other non-alcoholic beverages' under the First Schedule to the Excise Duty Act. The Respondent contended that the excisable good is the water itself, that the bottle is a mere vessel, and that preforms are packaging materials falling outside the scope of 'raw materials' under Section 14(1).
Court findings
On jurisdiction, the Tribunal held that a notice of appeal is the instrument by which an appeal to the Tribunal is instituted under Section 12 of the Tax Appeals Tribunal Act, and that the computation of time under Section 77(2) of the Tax Procedures Act, which excludes Saturdays, Sundays and public holidays, applies to the lodging of a Notice of Appeal under Section 52. Computing time from 22nd December 2025, the thirtieth day fell on 5th February 2026, and the Notice of Appeal filed on 2nd February 2026 was therefore within time (paras 94-110).
On the Kenafric point, the Tribunal held that the pendency of an appeal does not stay or invalidate a decision of a competent tribunal, and that the Respondent was not entitled to decline to apply the Kenafric decision on the strength of an unverified anticipated outcome of a pending appeal, particularly where no order of stay had been issued. The Tribunal noted that the High Court had since, in Commissioner of Legal Services & Board Coordination v Kenafric Beverages and Bottling Limited, dismissed the Commissioner's appeals and upheld the Tribunal's decisions on preforms (paras 111-118).
On the substantive question, the Tribunal held that preforms answer to the definition of raw materials, being basic substances in a modified or semi-processed state used as an input for subsequent transformation into a finished good. It held that the excisable good under the First Schedule to the Excise Duty Act is 'bottled or similarly packaged waters', so that the packaging is constitutive of, and not merely incidental to, the excisable good. The conversion of preforms into bottles was held to be 'manufacture' within Section 2 of the Excise Duty Act, being an intermediate or uncompleted process in the production of excisable goods. The Tribunal distinguished Commissioner of Domestic Taxes v London Distillers (K) Limited, where the excisable good (alcoholic beverage) was defined without reference to packaging, and applied Commissioner of Legal Services & Board Coordination v Kenafric Beverages and Bottling Limited, which concerned the same input and the same charge (paras 119-153).
Outcome
The Tribunal allowed the Appeal, set aside the Respondent's Objection Decision dated 22nd December 2025, and ordered each party to bear its own costs (paras 156-157).
Major issues / areas of contention
- Whether there was a proper Appeal before the Tribunal, concerning the computation of the thirty-day period for lodging a Notice of Appeal under Section 13(1) of the Tax Appeals Tribunal Act read with Section 77(2) of the Tax Procedures Act.
- Whether the Respondent was justified in declining to apply the Tribunal's decision in Kenafric Industries Limited v Commissioner of Domestic Taxes on account of a pending appeal before the High Court.
- Whether the Appellant was entitled to offset excise duty paid on preforms against excise duty payable on its finished excisable beverages under Section 14(1) of the Excise Duty Act.
- Whether preforms constitute 'raw materials' for purposes of Section 14(1) of the Excise Duty Act.
- Whether the blow-moulding of preforms into bottles amounts to 'manufacture' under Section 2 of the Excise Duty Act.