Foul Play Cost KRA Sh566M In Sugar Imports Dispute

Kenya Revenue Authority has been ordered to pay a sugar importer Sh566.1 million as compensation for losses suffered as a consequence of its change of date of importation of duty free sugar more than a decade ago.

The High Court further awarded Sh1 million to Transouth Conveyors Ltd as exemplary damages to demonstrate its disapproval of KRA’s conduct.

Justice Patrick Otieno said KRA, as declared by the Court of Appeal changed effective dates of importation of sugar, imposed undue duty on Transouth Conveyors Ltd’s consignment at 100 per cent and failed to release it.

“That conduct I find to be oppressive, high handed and are aggravating the courts view on the defendant,” said Justice Otieno.

Justice Otieno further said that while KRA contended that it should be given opportunity to make mistakes because it is a public body, he does not agree.

“I refuse to agree because being a state agency and public body it is bound to observe values and principles of governance,” said Justice Otieno.

Justice Otieno said KRA is bound to act reasonably and efficiently in good faith to inspire public confidence.

The court said that it was satisfied that KRA’s action was arbitrary, oppressive and justified an award of exemplary damages.

Justice Otieno said KRA had acted in a high handed manner and unlawfully thus the company was entitled to insist on fairness and application of the law to not only protect a property right but also cushion and safeguard the rule of law.

According to Transouth Conveyors Ltd pursuant to Legal Notice No.12 of March 01 2004 by the Minister of Finance, Gazette Notice No.296 of January 11 2007 and a letter dated January 12, 2007, by Kenya Sugar Board (KSB), it opened requisite letters of credit through African Banking Corporation.

The company says it then imported from Egypt, a state member of the Common Market for Eastern and Southern Africa (Comesa) Free Trade Area, 5,000 metric tonnes of raw/white sugar valued at US$1,840,000.

It also told the court that on February 02 2007, KRA put an advertisement in a local newspaper whose effect was to change the effective date of importation of the 2007/8 duty free sugar from Comesa from February 1, 2007, as had earlier been published by KSB to March , 2007.

The plaintiff said that by virtue of the defendant’s decision, its consignment of sugar was liable to be subjected to 100 per cent duty contrary to the indication by KSB in Gazette Notice No.296.

According to the plaintiff, the wrongful act by the defendant resulted to its inability to clear its consignment as the duty payable was high.

The company said that African Banking Corporation Ltd returned letters of credit opened with it on the basis of zero-rated duty to Egypt for cancellation as a result of KRA’s decision and application of 100 per cent duty on the consignment.

KRA said the declaration of Legal Notice No.12 of March 1 2004 by the Minister for Finance to allow for importation of sugar on duty free basis from Comesa was not for any sugar from the member states.

It admitted issuing press notices without any malice but maintained it was meant and had been previously used to explain and clarify the implementation of the Legal Notice.

KRA said it was entitled to clarify issues which arose between KSB and itself in reference to the Legal Notice issued pursuant to Section 118 of the Customs & Excise Act and as previously implemented by all those affected.

The taxman in denying imposing prohibitive duties on the plaintiff’s sugar contended that the company had the option of reshipping, clearing the sugar under protest or give security pending determination of a case in court.