Judgment summary
This appeal concerned the correct tariff classification of a product imported by Palsgaard Kenya Limited, described as Palsgaard Gel 0717, in 10kg and 18kg packaging. The Respondent classified the product under HS Code 2106.90.20 as a food preparation, while the Appellant argued the correct classification was HS Code 3402.39.00 or 3824.99.90, describing it as an organic surface-active agent or chemical preparation.
The Tribunal examined the composition and function of the product, being potassium stearate in glycerol, and applied the General Interpretation Rules (GIRs) for classification under the EAC/CET. It found that the product's main function was as an emulsifier and stabiliser used in cake gel production, not as a food ingredient itself.
The Tribunal held that the Respondent erred in classifying the goods under HS Code 2106.90.20 and that HS Code 3402.39.00 provided the more specific and correct classification. The appeal was allowed and the Respondent's review decision was set aside.
Background
The Appellant is a company registered under the Companies Act, Cap 485 Laws of Kenya, carrying on business in Kenya [1]. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for administering revenue laws [2].
The Appellant imported a product declared as Palsgaard Gel 0717 under import entry numbers 25EMKIM400203103 and 25EMKIM400769740, classifying it under 2022 EAC/CET Code 3402.39.00 [3]. The consignment was partially verified as to quantities and value but not on the tariff issue [3].
The Respondent issued tariff classification rulings dated 14th August 2025, references KRA/C&BC/V&T/THQ/0203/08/2025 and KRA/C&BC/V&T/THQ/0204/05/2025, classifying the product under a different HS Code [4]. The Appellant applied for review on 29th August 2025, and the Respondent issued a review decision dated 22nd September 2025 confirming the original ruling [5]. The Appellant then filed a notice of appeal dated 23rd October 2025 [6].
Core dispute
The central issue for determination was whether the Respondent erred in classifying the Appellant's goods under HS Code 2106.90.20, as opposed to HS Code 3402.39.00 [35].
The Respondent classified the product under heading 21.06, covering food preparations not elsewhere specified, on the basis that Palsgaard Gel 0717 was a food additive and key ingredient used as an emulsifier in cake production, with a composition of potassium stearate in glycerol (Glycerol E422 and Potassium salts of fatty acids E470a) [22]-[24].
The Appellant contended that the product was not a key ingredient in cake production but a stabiliser added in small quantities in an emulsifier system due to its functionality as a surface-active agent, and that it was more aptly classifiable under HS Code 3402.39.00 or 3824.99.90, being a mixture of food additives defined by E-numbers or INS numbers [12]-[13].
The Appellant also raised grounds concerning the Respondent's failure to test the product before ruling and alleged breach of the right to fair administrative action and legitimate expectation [7(f)-(g)].
Court findings
The Tribunal applied the General Interpretation Rules (GIRs) for classification of goods under the EAC/CET, referring to GIR 1, GIR 3 and GIR 6 [36]-[37], and cited the Canadian case of Puratos Canada Inc v Canada (Customs and Revenue) on the sequential approach to classification [38].
The Tribunal found that the product was not cake gel, nor a finished or semi-finished food preparation, but a preparation of potassium stearate in glycerol whose stated commercial function was to act as a surface-active emulsifying and stabilising agent, used in small quantities for that technical function; no evidence showed the product contained flour, sugar, milk or other foodstuff [45].
The Tribunal held that a food preparation may contain chemical ingredients, but this does not mean a chemical preparation used by a food manufacturer automatically becomes a food preparation under heading 21.06 [46]. It found that the main purpose of the product was to produce a stable cake gel by ensuring whipping performance and improving shelf life, meaning its functionality was that of an emulsifier and stabiliser, not a food ingredient [50].
Applying GIR 3(a), the Tribunal found heading 34.02 provided the most specific description of the product, and that even under GIR 3(b), the essential character analysis would still lead to heading 34.02 [53].
On the burden of proof, the Tribunal noted that under Section 30(b) of the Tax Appeals Tribunal Act and Section 223 of EACCMA, the burden rests on the Appellant, citing Ushindi Exporters Limited v Commissioner of Investigation and Enforcement [2020] eKLR [55]-[56]. However, relying on Commissioner of Domestic Taxes v Bosky Industries Limited [2025] KEHC 7965 (KLR), the Tribunal held that once the Appellant produced a prima facie evidential basis on the product's composition and function, the evidential burden shifted to the Respondent, which the Respondent failed to discharge [57]-[58].
The Tribunal further observed that the Respondent should have conducted laboratory tests to prove the product was not an 'organic surface-active agent' under Note 3 to Chapter 34, and that having acknowledged its laboratory could not accurately analyse the product, it could not rely on that evidentiary gap to sustain a different classification [59]-[60].
Outcome
The Tribunal found and held that the Respondent erred in classifying the Appellant's goods under HS Code 2106.90.20 as opposed to HS Code 3402.39.00 [61].
The appeal was allowed, the Review decision dated 22nd September 2025 was set aside, and each party was ordered to bear its own costs [62]-[63].
Major issues / areas of contention
- Whether Palsgaard Gel 0717 was correctly classified under HS Code 2106.90.20 as a food preparation, or should have been classified under HS Code 3402.39.00 as an organic surface-active agent.
- Whether the Respondent properly applied the General Interpretation Rules (GIRs), including GIR 1, GIR 3 and GIR 6, in determining the tariff classification.
- Whether the Respondent erred in relying on the product's use in cake production and glycerol's calorific value to justify classification under heading 21.06.
- Whether the Respondent was entitled to issue a classification ruling without first conducting laboratory testing of the product.
- Where the burden of proof lies in a customs classification dispute, and whether that burden shifts to the Respondent once the Appellant produces prima facie evidence of the product's composition and function.
- Whether the Respondent's admitted inability to accurately test the product could be relied upon to sustain a classification adverse to the Appellant.