Judgment summary
Ocean Network Express Kenya Limited, a VAT-registered container shipping agent acting for Ocean Network Express PTE Ltd of Singapore, lodged five VAT refund applications on 29th August 2024 for excess input tax from zero-rated supplies covering December 2022 to July 2024, totalling Kshs. 12,188,702.00.
One claim, for Kshs. 5,339,124.00, was approved and paid. The remaining four claims, cumulatively Kshs. 6,849,578.00, were rejected by orders dated 10th September 2025 and 18th September 2025 on the grounds that the inputs were reimbursable by the principal and that, as an agent, the Appellant could not deduct input VAT.
The Tribunal found that the Appeal was properly before it, that the Respondent's refund rejection decisions were issued outside the timelines in Section 47 of the TPA such that the four applications were deemed ascertained and approved by operation of law, and that the Appellant was in any event entitled to the refunds claimed. The Appeal was allowed.
Background
The Appellant is a Kenyan-incorporated company providing container shipping agency services principally through the Port of Mombasa as exclusive agent of ONE PTE, a Singapore-resident global shipping line. It is VAT-registered under the VAT Act.
On 29th August 2024 the Appellant lodged five VAT refund applications on iTax for excess input tax from zero-rated supplies for December 2022 to July 2024. The Respondent's refunds team, by letter of the same date, stated the claims could not be processed as they had been forwarded for audit.
A notice dated 17th October 2024 under Section 59 of the TPA notified the Appellant of a VAT refund audit of the five claims. The audit proceeded through a kick-off meeting and exchanges of information. On 4th March 2025 the audit team confirmed the approved refund audit had been forwarded to Refund Headquarters.
On 11th August 2025 the Respondent approved and disbursed the refund for the December 2022 to March 2023 claim of Kshs. 5,339,124.00. By rejection orders dated 10th September 2025 and 18th September 2025, the Respondent rejected the remaining four claims totalling Kshs. 6,849,578.00, citing reimbursement by the principal and the Appellant's status as an agent. Credit Adjustment Vouchers were issued simultaneously, restoring the rejected sums as excess input tax for carry forward.
Core dispute
The Appellant contended that the Respondent's refund rejection decisions were issued out of time, contrary to Section 47(4A) of the TPA, such that the four applications had been deemed ascertained and approved by operation of law before the rejection orders were issued. It further argued, in the alternative, that the Respondent's conduct violated its legitimate expectation, and that its status as agent of ONE PTE did not disentitle it from deducting input VAT on its own operating costs, since the private agency relationship and the statutory VAT relationship were distinct.
The Respondent contended, first, that the Appeal was time-barred because the operative appealable decision was the letter of 29th August 2024, not the later rejection orders. On the merits, it argued that the refund decision of 29th August 2024 was issued in time, that the audit was a standalone exercise under Section 59 of the TPA, and that as an agent under the Agency Agreement of 20th January 2023, whose costs and taxes were reimbursed by ONE PTE, the Appellant could not claim input VAT on costs not attributable to it. It also raised, in submissions, timeline and documentary objections concerning the refund claims.
Court findings
On the preliminary objection, the Tribunal found that the letter of 29th August 2024 was not a determination but a deferral to audit, and that the Respondent's own subsequent conduct, including the audit notice of 17th October 2024, the confirmation of 4th March 2025, and the payment of one claim on 11th August 2025, showed that no conclusive decision had been made in August 2024. The appealable decisions were the rejection orders of 10th and 18th September 2025, and the Appeal was properly before the Tribunal.
On timelines, the Tribunal found that the Respondent had subjected the applications to an audit under Section 47(4) of the TPA and was therefore bound to determine them within one hundred and twenty days, that is by 27th December 2024. The rejection orders, issued 377 and 385 days after lodgement, were issued when the Respondent was functus officio. The word "shall" in Section 47(4A) is mandatory and self-executing, and the four applications stood deemed ascertained and approved by operation of law upon expiry of the 120-day period. The rejection orders were nullities.
On substantive entitlement, the Tribunal held that the six-month timeline and documentary objections raised only in submissions could not be considered, as parties are bound by their pleadings, and in any event did not withstand scrutiny given Section 17(5)(d) of the VAT Act's 24-month window. On agency, the Tribunal distinguished between disbursements procured for the principal and an agent's own inputs consumed in making its own supply, finding the disputed inputs (security, office fit-out, and IT services) fell into the latter category. Relying on Hapag-Lloyd Kenya Limited v Commissioner of Domestic Taxes, the Tribunal held that the private agency relationship between the Appellant and ONE PTE was separate from the statutory VAT relationship, and could not extinguish the Appellant's statutory right to input tax deduction under Section 17 of the VAT Act. The Tribunal found the Appellant had shown, through schedules and correspondence, that it was reimbursed net of VAT, and that the Credit Adjustment Vouchers issued by the Respondent acknowledged the input tax was genuine and attributable to the Appellant.
Outcome
The Tribunal allowed the Appeal. It set aside the Respondent's VAT refund rejection orders dated 10th September 2025 and 18th September 2025. It held that the Appellant's four refund applications lodged on 29th August 2024, under acknowledgement numbers KRA202458191042, KRA202458191154, KRA202458191258 and KRA202458191444, were allowed by operation of law pursuant to Section 47(4A) of the Tax Procedures Act.
The Respondent was ordered to pay the Appellant a refund of Kshs. 6,849,578.00 within sixty (60) days of the date of the Judgment. Each party was ordered to bear its own costs.
Major issues / areas of contention
- Whether the Appeal was properly before the Tribunal, turning on whether the letter of 29th August 2024 or the rejection orders of September 2025 constituted the appealable refund decision
- Whether the Respondent's refund rejection decisions were issued outside the timelines prescribed under Section 47 of the Tax Procedures Act, and the effect of the deeming provision in Section 47(4A)
- Whether the Appellant, as agent of ONE PTE, was entitled to deduct input VAT on its own operating costs and claim a refund of the resulting excess, notwithstanding reimbursement arrangements under the Agency Agreement