Court of Appeal stops offloading of sugar in Sh2.5b tax dispute

The Court of Appeal has dismissed a High Court order allowing an importer to offload 40,000 tonnes of sugar from a ship at the centre of a legal dispute.

The Kenya Revenue Authority (KRA) is demanding Sh2.5 billion in taxes it claims Darasa Investment Company is trying to avoid paying by importing the 800,000 bags of sugar from South America. Darasa has argued that the sugar was imported during a tax-free window period.

On December 27 last year, KRA failed to stop the offloading of the sugar when the High Court in Mombasa ruled in favour of the importer. The taxman appealed the decision.

On Wednesday, KRA got a temporary reprieve after the Court of Appeal blocked the offloading of the sugar from the ship.

Appellate judges Alnashir Visram, Martha Koome, and Wanjiru Kariuki faulted the orders by Justice Eric Ogolla.

Unlawful orders

“The judge failed to address the issue of inconsistency when the consignment (sugar) was shipped into the country. We find that the judge’s orders are unlawful and the opinion has no merit and is hereby dismissed,” said Justice Koome, who read the ruling.

In their appeal dated March 20, 2018, KRA lawyers Gersom Otachi and Carol Mburugu said KRA would lose Sh2.5 billion if the sugar was offloaded without payment of duty.

Offloading suspended

Justice Ogolla had ruled on February 22, 2018, that the sugar aboard MV Iron Lady from Brazil be offloaded and stored at JB Maina private warehouse after he rejected an application by KRA to have the offloading suspended.

The judge said KRA was discriminative as it had allowed 13 other companies to offload the sugar they had imported.

He said the same punishment should have been applicable to the other companies if Darasa had contravened the by-laws of tax-free importation.