The Tax Appeal Tribunal has sided with matchbox manufacturer Match Masters Limited in a dispute over the classification of folding packaging materials for safety matches.
The court overturned the Kenya Revenue Authority’s cancellation of a prior tariff ruling against the company, saying the tax collector cannot set aside a tariff ruling on a product without valid justification.
An advance tariff ruling is a written instruction by the IRS explaining how to withdraw an importer’s goods at a customs point. Instructions are usually given before goods are imported.
“The tariff provisions provide the basis on which taxpayers plan their business affairs and therefore this unjustified change is arbitrary, oppressive and unreasonable. Thus, the Court found that the respondent erred in its decision to reclassify the appellant’s products from HS code 3606.90.00 to 4819.20. 00. The court presided over by Robert Mutuma Mugambi, in its decision issued on October 4, 2024, said that the appellant’s appeal had merit.
Match Masters Limited applied for an advance tariff ruling on 4 August 2023 for foldable packaging materials covered with combustible materials.
The KRA issued a customs ruling and classified the product under HS Code 3606.90.00, which covers fireworks products and combustible materials, but later overturned the ruling on November 17, 2023 and reclassified the product under HS Code 4819.20.10, which relates to packaging materials. .
The company objected to this decision on the grounds that there was no legal basis for cancellation within 12 months, as stipulated in Section 248A of the East African Community Customs Administration Act (EACCMA).
The company argued that the original designation should remain binding for 12 months and that the revocation was arbitrary.
Match Masters Limited confirmed that it had provided product samples and the necessary information to the Customs and Border Control Commissioner during its initial application.
The company emphasized that Article 248a of the EACCMA only allows the cancellation of a tariff ruling if it is based on incomplete, inaccurate or misleading information, none of which applies in this case.
International guidelines, including the World Customs Organization (WCO) guidelines, also restrict the cancellation of advance rulings unless there is false or misleading information, the manufacturer said.
For its part, KRA defended the cancellation, stressing that the decision was made based on new information obtained during the verification process. The taxman argued that the product had been reclassified based on a change in its description, from conformal pans to folding packaging materials for safety matches, and that the HS code should be amended accordingly.
The tax official claimed he also relied on World Customs Organization guidelines, which allow rulings to be amended or revoked, and said the original ruling was wrongly made. Furthermore, the Respondent asserted that the advance ruling was scheduled to expire in August 2024, making the revocation consistent with international practice.
However, the court found that the revocation was not justified because there was no change in the product’s chemical composition or intended use that would warrant reclassification.
The court ordered the return of the original HS code 3606.90.00 for Match Masters Limited’s product.
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