Judgment summary
This is a judgment of the Tax Appeals Tribunal at Nairobi in an appeal by Extra Mile Limited against a demand notice issued by the Commissioner of Customs and Border Control for short-levied duty on imports of brown sugar covering 2020 to 2024.
The Tribunal identified two issues for determination, namely whether the Appellant's review application was time-barred and whether the Respondent was justified in departing from the Transaction Value Method. Having found the review application time-barred, the Tribunal held that the demand was due and payable by operation of the law and declined to consider the valuation method issue, treating it as moot.
The appeal was dismissed and the Respondent's Demand dated 16th July, 2025 was upheld, with each party bearing its own costs.
Background
The Appellant is a private limited company whose principal activity is manufacturing, specialising in the import and trade of sugar (para 1). The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, mandated with assessment, collection and administration of tax revenue, including the statutes in Part 1 and 2 of the First Schedule to the Act (para 2).
The Respondent conducted a desk audit on the Appellant's importation of brown sugar covering the period 2020 to 2024 and, on 27th January 2025, issued a notice for short levied duty amounting to Kshs 9,559,501.00 (para 3).
On 10th July 2025 the Appellant requested to be allowed to lodge a late objection. The Respondent reviewed this request and, by a letter dated 16th July 2025, issued a Review Decision declining it (para 4). Dissatisfied, the Appellant filed a Notice of Appeal dated and filed on 3rd October, 2025 (para 5).
Core dispute
The Appellant's Memorandum of Appeal, dated and filed on 3rd October, 2025, contended that the demand notice was issued in bad faith, that the Commissioner unjustifiably departed from the Transaction Value Method under the EACCMA, that its invoices bore genuine payment terms, that the use of an FOB value of Kshs 1000/MT was arbitrary and inconsistent with the EACCMA and the WTO Valuation Agreement, and that the Respondent failed to consider all material facts before issuing the objection decision (para 6).
The Appellant argued that the transaction value declared in its invoices should have been accepted as the primary valuation method under Section 122 and the Fourth Schedule of the EACCMA, and that the Respondent had not provided comparative data to justify departing from it (paras 14 to 17).
The Respondent maintained that the Appellant's invoices lacked incoterms and payment terms and bore structural defects such as varying fonts, blank columns and inconsistent date formats, rendering the transaction value unreliable under Section 122(4) of the EACCMA. It stated that it therefore lawfully proceeded to Paragraph 3 of the Fourth Schedule, using the transaction value of identical goods imported contemporaneously from the same country of origin (paras 27 to 33, 42 to 53). The Respondent also contended that the Appellant's request for a late objection, rather than a timely review application, was unjustified and that the demand was accordingly due and payable (paras 25, 29, 59).
Court findings
The Tribunal framed two issues for determination: whether the Appellant's review application was time-barred, and whether the Respondent was justified in departing from the Transaction Value Method (para 57).
On the timing issue, the Tribunal noted that the Respondent's demand letter was dated 27th January 2025, while the Appellant only responded on 10th July 2025, a period exceeding 150 days, well outside the 30-day period prescribed by Section 229(1) of the EACCMA (paras 60 to 62). The Tribunal held that the word 'shall' in Section 229(1) is mandatory, relying on Equity Group Holdings Ltd vs Commissioner of Domestic Taxes (para 62).
The Tribunal considered whether the Appellant's stated reason for delay, that it believed the matter was linked to an ongoing case with the Investigation and Enforcement department and 'didn't see the need to act', amounted to reasonable cause under Section 229(3) of the EACCMA. The Tribunal found that this was not a reasonable cause but a choice made by the Appellant, which carried consequences (paras 63 to 65).
The Tribunal relied on Speaker of the National Assembly vs James Njenga Karume for the principle that a clear statutory procedure for redress must be strictly followed (para 66), and observed that 'equity favours the vigilant not the indolent' (para 67).
Having found the review application time-barred, the Tribunal held that the short-levied duty of Kshs 9,559,501.00 was due and payable by operation of the law, and declined to determine the second issue concerning the Transaction Value Method, treating it as moot (paras 68 to 70).
Outcome
The Tribunal dismissed the appeal in its entirety, holding that it lacked merit (para 71).
The Respondent's Demand dated 16th July, 2025 was upheld (para 71).
Each party was ordered to bear its own costs (para 71).
Tp method highlighted
The appeal concerned customs valuation methodology under the EACCMA rather than transfer pricing between related parties. The Appellant argued for retention of the Transaction Value Method under Section 122 and the Fourth Schedule, while the Respondent asserted it had lawfully moved to the Transaction Value of Identical Goods method under Paragraph 3 of the Fourth Schedule after rejecting the Appellant's invoices as unreliable (paras 14, 27 to 33, 42 to 53). The Tribunal did not rule on the merits of this valuation dispute, as it found the appeal disposed of on the time-bar issue and treated the valuation method question as moot (para 70).
Major issues / areas of contention
- Whether the Appellant's application for review of the Respondent's demand was lodged within the 30-day period prescribed by Section 229(1) of the EACCMA, 2004.
- Whether the Appellant's stated reason for delay, being a belief that the matter was linked to an ongoing Investigation and Enforcement case, constituted reasonable cause under Section 229(3) of the EACCMA to permit a late review application.
- Whether the Respondent was justified in departing from the Transaction Value Method under Section 122 and the Fourth Schedule of the EACCMA and applying the Transaction Value of Identical Goods method instead.
- Whether the Respondent's Post Clearance Audit and subsequent Demand Notice were lawful, predictable and procedurally sound.
- Whether the burden of proof under Section 56(1) of the Tax Procedures Act was discharged by the Appellant in disputing the Respondent's valuation.