Judgment summary
Graphic Lineups Limited appealed against a demand notice issued by the Commissioner of Domestic Taxes requiring payment of VAT amounting to Kshs. 15,726,451 on imported plant and machinery, following the National Treasury's failure to honour an undertaking to pay that VAT (paras 3, 41).
The Tribunal found that the machine was entered in August 2020, after the Tax Laws (Amendment) Act, 2020 came into force on 25th April 2020, meaning the importation was subject to VAT and the Respondent had not applied the law retrospectively (paras 34-38).
The Tribunal held that the primary statutory duty to pay tax rested with the taxpayer, not the National Treasury, and that the Treasury's default on its undertaking did not relieve the Appellant of that obligation. The appeal was dismissed and the review decision upheld, with each party bearing its own costs (paras 40-43).
Background
The Appellant, a limited liability company, imported a machine (HP Indigo Digital Offset Press 12000, 6 colour, entry number 2020ICD228097) sourced from Dubai, UAE, shipped via Rotterdam aboard Ocean Vessel MSC Regulus, landing at Mombasa and later delivered to ICD, Embakasi, Nairobi (paras 8-9).
The Appellant applied for duty and VAT exemption through the Ministry of Industrialization, Trade and Enterprise Development, which forwarded the application to the National Treasury on 24th June 2020. The National Treasury wrote to the Respondent on 13th July 2020 (ref DFN 415/402/039) undertaking to pay VAT on plant and machinery shipped on or before 25th April 2020, and instructed release of the machine (paras 3, 10-11, 29).
The duty and VAT purportedly exempted amounted to Kshs. 15,726,451. When the National Treasury's undertaking was not honoured, the Respondent issued a demand notice dated 12th January 2026 (ref KRA/CBC/RMD/PCA/029/26(NOD)) calling for payment of this sum from the Appellant as bearer of the primary tax obligation (paras 3, 12).
The Appellant objected on 11th February 2026, but the Respondent issued a review decision dated 17th February 2026 upholding the assessment. The Appellant then filed a notice and memorandum of appeal dated 24th February 2026 (paras 4-6).
Core dispute
The core issue was whether the Respondent erred in demanding that the Appellant pay VAT of Kshs. 15,726,451 on the basis that the National Treasury had failed to honour its undertaking to pay that VAT (para 26).
The Appellant argued that the imported machinery qualified for exemption under the law applicable when importation commenced, that the Respondent had applied the Tax Laws (Amendment) Act, 2020 retrospectively, that it had followed the prescribed government procedure for exemption, and that the Treasury's default could not form a lawful basis for recovering tax from it, also invoking the doctrine of legitimate expectation (paras 14-17).
The Respondent contended that the primary responsibility for tax payment lay with the Appellant under Section 130 of the EACCMA unless specifically exempt under the First Schedule of the VAT Act 2013, and that where the National Treasury defaulted on payment, the Respondent was entitled to recover the tax due from the owner of the goods. The Respondent relied on Sections 130, 133, 135, 235, 236 and 229 of the EACCMA and on the High Court decision in Cale Infrastructure Construction Co. Ltd v Commissioner of Customs & Border Control & Another (paras 20-24).
Court findings
The Tribunal examined the Appellant's documents, noting the invoice was dated 27th February 2020, the Import Declaration Form (though illegible) was dated 21st March 2020, the PVoC was dated 30th March 2020, the Bill of Lading was issued on 20th April 2020, and the packing list was dated 21st April 2020, confirming that importation commenced before the Tax Laws (Amendment) Act 2020 took effect. It also noted that the Single Administrative Document (SAD) was conspicuously missing from the Appellant's documents (paras 31-32).
The Tribunal held that what matters for determining the applicable rate of duty and VAT liability is the date of entry of the goods, not the date importation commenced, relying on Sections 34(1) and 120(1) and (3) of the EACCMA. Since the Appellant itself stated it bought the machine under entry number 2020ICD228097 in August 2020, after the 25th April 2020 commencement date of the amending law, the import was subject to VAT and the Respondent had not applied the law retrospectively (paras 33-38).
The Tribunal found that the statutory duty to pay tax rests with the taxpayer, not the National Treasury, and that where the Treasury undertakes to pay tax on a taxpayer's behalf, the taxpayer must ensure that undertaking is honoured. Citing Cale Infrastructure Construction Company Limited v Commissioner of Customs and Border Control & another [2025] KEHC 11263 (KLR), the Tribunal held that the existence of the Treasury's undertaking did not relieve the Appellant of its primary tax obligation (paras 40, 41).
The Tribunal concluded that under Section 30 of the Tax Appeal Tribunal Act Cap 469A, the taxpayer bears the burden of demonstrating that taxes demanded are incorrect or not payable, and found that the Appellant failed to discharge this burden (para 42).
Outcome
The Tribunal held that the appeal was not meritorious and dismissed it. The review decision dated 17th February 2026 was upheld, and each party was ordered to bear its own costs (paras 43-44).
Major issues / areas of contention
- Whether the Respondent erred in demanding that the Appellant pay VAT of Kshs. 15,726,451 on the basis that the National Treasury failed to honour its undertaking to pay that VAT.
- Whether the Respondent applied the Tax Laws (Amendment) Act, 2020 retrospectively to the Appellant's importation.
- Whether the date importation commenced or the date of entry of the goods determines the applicable rate of duty and VAT under the EACCMA.
- Whether a National Treasury undertaking to pay tax relieves the taxpayer of its primary statutory tax obligation when the Treasury defaults.