Judgment summary
Milestone Games Limited applied to the Tax Appeal Tribunal for orders lifting Agency Notices issued against its bank accounts and telecom partners, and for an injunction restraining the Respondents from recovering alleged excise duty and withholding tax pending determination of a substantive appeal. A second application sought to amend the first to cite the correct statutory provisions.
The Tribunal allowed the amendment application, finding it did not introduce new issues, caused no prejudice and was not unduly delayed. It then considered the substantive application and found that the Applicant had an arguable appeal before it, filed on 16th February, 2026 against the Respondent's objection decision of 5th January, 2026.
The Tribunal held that under Section 42(14) of the Tax Procedures Act, the Respondent was prohibited from issuing Agency Notices while an appeal against the assessment was pending. It found the Applicant's application merited and ordered the Agency Notices issued on 30th April, 2026 to be lifted unconditionally, with no order as to costs (paras 24-26).
Background
The Respondents issued an assessment dated 29th September, 2025 for withholding tax and excise duty, relating to the period June 2023 to February 2024. The prayers in the application state the amounts as excise duty of Kshs 1,011,230,716 and withholding tax of Kshs 462,991 (para 1(b)).
A similar dispute over the same withholding tax and excise duty had previously come before the Tribunal in Appeal Number TAT E873 of 2023, decided on 22nd November, 2024, which found that the Respondents' letters and objection decision had been issued in contempt of orders in Kakamega Constitutional Petition No. E016 of 2023 and were null and void (para 2(c)).
The Applicant lodged a notice of objection on or about 9th October, 2025. It contended that under Section 51(11) of the Tax Procedures Act, the objection stood allowed by operation of law because the Respondents did not issue an objection decision within 60 days. The Respondents nonetheless issued an objection decision on 5th January, 2026 (paras 2(d)-2(g)).
On 23rd April, 2026, the Respondents issued a demand notice to the Applicant for Kshs 1,011,693,707.00, allegedly for tax owed by Kibos Sugar & Allied Industries Ltd, an entity the Applicant claimed no knowledge of or connection to (para 2(i)). On 30th April, 2026 at 4.00pm, the Respondents issued Agency Notices to the Applicant's bankers, including Absa Bank, Kenya Commercial Bank, Eco Bank, Equity Bank and I&M Bank, and to Telcos Safaricom and Airtel (paras 2(j) and 7).
The Applicant had filed an appeal before the Tribunal on 16th February, 2026 against the Respondent's objection decision of 5th January, 2026 (para 16).
Core dispute
The Applicant sought an injunction and stay against the Respondents to prevent recovery of alleged excise duty and withholding tax through Agency Notices issued to its bankers and Telco partners, pending determination of its substantive appeal, and sought joinder of Safaricom PLC and Ecobank Kenya Limited as interested parties.
The Applicant also sought leave to amend its original Notice of Motion dated 4th May, 2026 to cite the correct statutory provisions under the Tax Appeals Tribunal Act and the Tax Appeal Tribunal (Procedure) Rules, 2015, having inadvertently omitted them.
The Respondents opposed both applications, arguing that the Tribunal lacked jurisdiction to grant injunctive orders, that the Agency Notices had already been lifted, that the Applicant had already obtained relief from the High Court in HCJRMISC E064 of 2026, that the 3rd Respondent's office no longer existed, and that the amendment application was an improper attempt to litigate by ambush after pleadings had closed.
Court findings
The Tribunal found that its power to allow amendment of pleadings is provided under Rule 21 of the Tax Appeals Tribunal (Procedure) Rules 2015, which permits amendment at any time before closure of the case provided no new issues are raised. It held the amendment sought only clarified the legal provisions relied upon, did not raise new issues, was not unduly delayed and caused no prejudice to the Respondent, and therefore allowed it (paras 13-15).
On the substantive application, the Tribunal found the Applicant had an arguable appeal before it and that Section 18 of the Tax Appeals Tribunal Act gave it discretion to stay or affect the operation of a decision to secure the effectiveness of the proceedings (paras 16-18).
The Tribunal held that under Section 42(14) of the Tax Procedures Act, particularly subsection (e), the Commissioner is prohibited from issuing an Agency Notice where the taxpayer has an appeal pending against an assessment specified in a decision of the Tribunal or court. It found that the Applicant had an active appeal when the Agency Notices were issued on 30th April, 2026 (paras 19-21).
The Tribunal noted that although the Respondent claimed the Agency Notices had been lifted, its own letter described them as merely suspended, and held that recovery measures must be carried out strictly in compliance with the law rather than at the Respondent's discretion (para 22). On a balance of convenience, the Tribunal found the Applicant had advanced sufficient grounds to warrant interference with the enforcement process (para 24).
Outcome
The Tribunal allowed the amendment application dated 18th May, 2026, deeming the amended Notice of Motion duly filed and served as the basis for its determination.
The Tribunal allowed the substantive application dated 4th May, 2026 as amended, and ordered that the Agency Notices issued by the Respondent on 30th April, 2026 to the Applicant's bankers and Telco partners be lifted unconditionally. No order was made as to costs (para 25).
Major issues / areas of contention
- Whether the Tribunal should allow amendment of the Notice of Motion dated 4th May, 2026 to cite the correct statutory provisions
- Whether the amendment introduced new issues or caused prejudice to the Respondent
- Whether the Tribunal had jurisdiction to grant orders staying or lifting Agency Notices
- Whether the Respondent was prohibited under Section 42(14) of the Tax Procedures Act from issuing Agency Notices while the Applicant's appeal was pending
- Whether the objection was deemed allowed by operation of law under Section 51(11) of the Tax Procedures Act due to the Respondent's delay in issuing its objection decision
- Whether the Agency Notices had in fact been lifted or merely suspended by the Respondent
- Whether the balance of convenience favoured granting the Applicant's application