Reprieve for KBL in Sh486.3 million tax dispute with KRA

Times Tower building which hosts Kenya Revenue Authority offices in Nairobi. [File, Standard] Kenya Breweries Limited (KBL) got a reprieve after the Tax Tribunal dismissed Kenya Revenue Authority's (KRA) demand for more than Sh486.2 million tax. KBL appealed KRA's demand of Sh486,284,863 inclusive of principal taxes and interest in respect of excise duty and Value Added Tax (VAT) from Defco sale, export of products and importation of apple cider concentrate as finished product. The Tribunal led by Justices Christine Muga, Boniface Terer, Eunice Ololchike and Elisha Njeru said KRA's decision was incorrect and excessive. The tribunal said that KBL discharged its burden of proof pursuant to the provisions of Section 56 (1) of the Tax Procedure Act (TPA) and Section 30 of the Tax Appeal Tribunal Act (TATA). The tribunal said that the taxman failed to allow the brewers a chance to file all supporting documents including certificate of export despite an order by the tribunal and High Court granting more time. "The tribunal, having reviewed the schedules and other supporting documents notes and finds that the respondent (KRA) cannot decry the unavailability of documents but must instead review the documentary evidence that has been adduced as evidence by the appellant (KBL) and correct itself," said Justice Muga. The judges noted that KRA belaboured that the documents were inadmissible yet KBL was granted leave to file the documents by the tribunal and the high court. In the appeal, the brewer faulted KRA for wrongful re- classification of the apple cider concentrate as a finished product despite the fact that it is, and has been held to be a raw material. KBL said that by section 14(1) of the EDA, having imported excisable raw material, they were entitled to claim the pre-paid excise duty. The brewer claimed that pre-paid excise duty incurred in the importation of raw materials under custom entry number 2021MSA7745039 was correctly classified under tariff code 2106.90.20. However, KRA said that the correct tariff classification of apple cider concentrate is HS 2206.00.90, a finished product for which pre-paid excise duty cannot be claimed pursuant to Section 14 of the EDA. Further the taxman said that KBL failed to demonstrate how it uses the apple cider concentrate as a raw material in the production of other excisable goods for it to qualify for excise duty relief. In its determination, the Tribunal said that fermented apple compound is a raw material and that KBL is entitled to prepaid excise duty claimed on raw materials. On March 24, 2021, KRA disallowed Sh416,023,756 excise duty rebate claimed by KBL. KRA assessment determined that the tax liability in respect of excise duty and VAT be Sh668,066,461 but later revised it to Sh486,284,863 upon KBL objection. The taxman also disallowed a prepaid excise duty of Sh66,147,027 and indicated that a variance of 1,192,631 liters ought to be brought to charge. The taxman further charged the brewer Sh62,130,534 in respect of sales it made to Defco. However, the tribunal noted that the excise duty rebates claimed by KBL and the VAT assessment arose due to a perception by KRA that there was under declaration of excise duty due and payable. The tribunal said that KBL was entitled to a rebate on its exports after providing the correct export entries and documentation. KBL said that KRA erred in disregarding the documentation provided in support of their excise duty rebate claim of Sh38,880,996. The brewer provided the taxman with the schedule of export entries showing the corresponding certificates of exports and certificates of exit in support of the excise duty rebate and copies of Certificates of Exports for Sh260,723,515. KBL said that KRA erred in relying on the provisions of the VAT Act, CAP 476 of the Laws of Kenya as a basis for denying them a rebate it is entitled to under the Excise Duty Act (EDA). In their defense, the taxman said KBL rebate claim was disallowed for failure to satisfy that indeed the goods were exported and reached their declared destination. KRA implored the tribunal to find that the excisable goods KBL sought rebates on were vatable and it was erroneous for them to claim that the VAT regulations are inapplicable. The taxman said that the excise duty rebate of Sh38,880,996 had been disallowed because 31 entries were not made in KBL's name. Further KRA argued that excise duty rebate of Sh260,723,515 in respect of 183 entries were disallowed as Certificates of Export were not issued. The taxman said that prepaid excised duty claimed in respect of customs entry number 2021MSA7745039 of apple cider concentrate amounting to Sh66,147,027 was wholly disallowed as it is a finished product. KRA said that the entries disqualified as exports under excise duty were treated as local sales and subjected to VAT at 16 per cent.

Reprieve for KBL in Sh486.3 million tax dispute with KRA

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Reprieve for KBL in Sh486.3 million tax dispute with KRA

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