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Kenya Power required to pay KRA before accessing conductors

By JOHN MUTHONI | October 10th 2013


Kenya Power will have to clear taxes it owes to Kenya Revenue Authority for its consignment of conductors meant for Rural Electrification Project to be released from the Port of Mombasa.

The conductors were imported from a Chinese corporation Jiangsu have been at the port awaiting a court decision on the matter.

High Court Judge Justice Lenaola in his judgment said, “I find and that it was KPLC that was obliged to pay taxes and therefore apply for remissions.”

The High court Judge said that Bear Limited, which had been entrusted to transport the consignment from the Port of Mombasa to KPLC warehouses in Nairobi. was acting inconsistently with the law sighting that according to section 6 of Value Added Tax Act, tax on importation of goods into Kenya is to be charged as if it were a duty of custom and is payable by the persons who imports the goods  

“It is not disputed that the Minister has power to exempt the tax payer from paying taxes. The issue in this case is whether the conduct of the respondent in failing to process the clearing of the goods in light of the exemption is an ultra vires act as the ex-parte applicants contends,” Lenaola said.

He added that the commissioner was right to investigate on the issue of the letter.

According to the affidavit sworn on 1st August 2013 by Eric Obieko, a director of Bear Company that was the agent of Jiangsu, the Chinese Corporation entered a contract with the Kenya Power and Lighting Company Limited (KPLC) for the supply of conductors that were to be used for the rural electrification project across the country under the Kenya Electrification Expansion Project (KEEP).

Bear said that it had paid a total of Sh 24 million in cash and cheques to the commissioner in payment of outstanding dues   but the money was not properly credited to its account. It therefore applied for the exemption of custom duties. It argued that KRA was demanding more than Sh 40 million despite the direction by the Minister of Finance.

The goods had stayed in the port since February 2013 without the clearing agent or the importer making any efforts to clear or pay taxes. Thus the commissioner wrote to Kenya Power emphasizing that the company ought to have paid duty fees and taxes as the importer according to the documents they had received.

Kenya Power wrote a letter to Jiangsu on 8th July 2013 which it noted that the tax exemption allegedly sought and granted by KRA was not genuine and that it was required to pay all taxes and duty to allow for the clearing of the order.

“Note that we have received a demand from KRA that the goods are to be cleared by Friday 12th July 2013. You are hereby requested to clear all the goods and pay all taxes by the said date failure to which you surrender the import documents to Kenya Power to facilitate clearance of the goods at the port. Should we clear the goods, we shall recover all costs incurred from the total value of the contract.” The letter read.

Bear had sought that the court make an order of certiorari directed at the respondents directed at the purported quashing of the decision of the Minister of Finance to exempt the applicant’s goods from payment of duties to rescind the remission. To make an order prohibiting KRA from impounding, auctioning, destroying or disposing off the consignment.

They had also sought orders prohibiting the tax master from demanding tax from the power generating company and charging any duty from the goods.

Moreover, they had also sought that the High Court order the release of the consignment and it stays the KRA”s decision to demand duty from the goods exempted by the Minister for Finance.

Bear argued that it was not to benefit from the exemption as the goods were to be utilized by Kenya Power which procured them on terms that all taxes would be paid.

However, KRA argued that the exemption letter was a forgery and offended article 209 and 210 of the constitution as well as the provisions of the East African Community Customs Management Act of 2004.

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