Judgment summary
The Tribunal considered an appeal by Rohto Mentholatum (Kenya) Limited against a Review decision dated 30th October 2025 in which the Respondent uplifted the declared values of imported cosmetic products and demanded short-levied import duties of Kshs. 122,689.00 [7], [9], [65].
The Tribunal framed three issues: whether the Review decision met the requirements of Section 229(4) of the EACCMA; whether the Respondent lawfully departed from the Transaction Value Method; and whether the Respondent properly applied the Transaction Value of Identical Goods Method under Paragraph 3 of the Fourth Schedule to the EACCMA [92].
The Tribunal found that the Review decision met the formal requirements of Section 229(4) of the EACCMA [105]. However, it found that the Respondent did not lawfully depart from the transaction value method [136] and did not properly apply the transaction value of identical goods method [145]. The Tribunal allowed the Appeal, set aside the Review decision, and ordered each party to bear its own costs [146].
Background
The Appellant is a private limited liability company incorporated in Kenya whose principal business is the importation of pharmaceutical and cosmetic products from its related entities in the United Kingdom and Vietnam for sale in the Kenyan market [1].
In February 2025, the Appellant requested a quotation from Rohto Vietnam for specified products. Rohto Vietnam responded on 12th February 2025 with a quotation, and by an email dated 17th February 2025 explained that it had revised the prices with effect from 1st May 2025 pursuant to the Rohto Group's intercompany transaction policy [3], [4].
On 3rd July 2025, the Appellant and Rohto Vietnam entered into a contract for the purchase of the Products, following which the Appellant imported a consignment declared under entry number 25NBOIM408425695. During clearance, the Respondent's officers flagged the Consignment on the basis that the Appellant had under-declared its values compared to previously declared values [5].
By a letter dated 4th August 2025 the Appellant contested the value uplift. The Respondent, by a letter dated 6th August 2025, advised the Appellant to execute a bank guarantee equivalent to the taxes in dispute. The Appellant executed a bank guarantee with Stanbic Bank dated 12th August 2025, upon which the Consignment was released [6].
The Respondent issued a demand letter dated 4th September 2025 demanding short-levied import duties amounting to Kshs. 122,689.00 [7]. The Appellant lodged an application for review dated 3rd October 2025, received on 6th October 2025 [8]. The Respondent issued its Review decision by letter dated 30th October 2025 upholding the Demand and confirming valuation using the transaction value of identical goods method [9]. The Appellant filed its Notice of Appeal dated 11th December 2025 [10].
Core dispute
The core dispute concerned the correct method of customs valuation for the imported Consignment. The Appellant contended that it correctly applied the Transaction Value Method, being the primary method under Section 122 as read together with the Fourth Schedule of the EACCMA, and that the relationship between it and its related party, Rohto Mentholatum Vietnam Co. Limited, did not influence the price [13], [27], [38].
The Respondent contended that following a post-clearance audit it determined the declared values were undervalued, that the related-party relationship had influenced the transfer prices, and that it was entitled to reject the transaction value and move to the transaction value of identical goods method [67], [76], [86].
The Appellant also contended the Respondent failed to furnish reasons for the Review decision contrary to Section 229(4) of the EACCMA, failed to follow the procedure for upsetting the transaction value method, and applied the identical goods method without satisfying the mandatory statutory prerequisites [11].
Court findings
On the first issue, the Tribunal held that Section 229(4) of the EACCMA imposes obligations of timeliness and of substance [95]. The decision was rendered twenty-four days after receipt of the application, satisfying the timeliness obligation, which the Appellant did not contest [96]. On reasons, the Tribunal held that the provision demands intelligibility and not an exhaustive dissertation, and that the Appellant was able to formulate five precise grounds of appeal, indicating the decision disclosed the basis of the outcome [100], [101]. The Tribunal found the Review decision met the formal requirements of Section 229(4) [105]. It observed that complaints of violation of the right to fair administrative action are, in the first instance, the province of judicial review before the High Court [104].
On the second issue, the Tribunal reiterated the primacy and sequential application of the six valuation methods, and that under Paragraph 2(2)(a)(i) the relationship shall not in itself be a ground for regarding the transaction value as unacceptable [107], [108], [109]. The Tribunal was not persuaded by the Respondent's basis of assessment for four reasons: the Appellant placed before the Respondent a body of material explaining pricing which the Review decision did not engage [117], [118]; the 2025 price revision produced movements in both directions, inconsistent with a theory of relationship-driven suppression, including an increase in the price of the Acnes Scar Care 12g from USD 0.69 to USD 0.97 [120]; the comparison relied on imports predating the supplier's 2015 change of business model, a rationale already adjudged insufficient in the previous appeal, Tax Appeal No. 789 of 2021 [122], [123], [124]; and the language of the Review decision announced a conclusion rather than examining circumstances [125]. The Tribunal affirmed the burden rests on the importer but held the Appellant tendered evidence which the Respondent ignored rather than controverted [128], [129]. The Tribunal found the Respondent did not lawfully depart from the transaction value method [136].
On the third issue, the Tribunal held its second finding was dispositive, since Paragraph 3(1)(a) permits recourse to the identical goods method only where value cannot be determined under Paragraph 2 [137]. It nonetheless found independent infirmities: the comparator entries predated the 2025 goods by approximately a decade and did not satisfy the requirement of exportation at or about the same time [140], [141]; goods that had undergone formulation changes were not shown to be identical [141]; and the Respondent did not disclose the particulars of the comparator entries or the computations underlying the uplift [142], [143]. The Tribunal found the Respondent did not properly apply the transaction value of identical goods method and that the demand of Kshs. 122,689.00 could not stand [145].
Outcome
The Tribunal found the Appeal meritorious and issued the following orders: the Appeal be and is hereby allowed; the Respondent's Review decision dated 30th October 2025 demanding payment of Kshs. 122,689.00 be and is hereby set aside in its entirety; and each party to bear its own costs [146].
Tp method highlighted
The Appellant maintained a Transfer Pricing Policy in accordance with the Income Tax (Transfer Pricing) Rules, 2006, documenting arm's length pricing arrangements with its non-resident related parties, including Rohto Vietnam [44]. The policy documented a benchmarking analysis of comparable companies which established that the Appellant's operating margins fell within the inter-quartile range of operating margins of comparable companies [44], [118]. The Appellant also invoked the World Customs Organisation Guide to Customs Valuation and Transfer Pricing and WCO Commentary 23.1, which recognise that transfer pricing information may be used in examining the circumstances surrounding a sale [43]. The customs valuation methods at issue were the Transaction Value Method (Method 1) and the Transaction Value of Identical Goods Method (Method 2) under the Fourth Schedule to the EACCMA [28], [107].
Major issues / areas of contention
- Whether the Respondent's Review decision dated 30th October 2025 met the requirements of Section 229(4) of the EACCMA.
- Whether the Respondent lawfully departed from the Transaction Value Method in valuing the Appellant's imported goods.
- Whether the Respondent properly applied the Transaction Value of Identical Goods Method under Paragraph 3 of the Fourth Schedule to the EACCMA.
- Whether the related-party relationship between the Appellant and Rohto Mentholatum Vietnam Co. Limited influenced the price of the Products.
- Whether the Respondent observed the circumstances of sale test and the procedure required before rejecting the transaction value.
- Whether the Appellant discharged its burden of proof and whether the evidential burden shifted to the Respondent.