Billionaire industrialist Mohan Goliath has lost an appeal against the Kenya Revenue Authority (KRA) to reject his Sh1,782,386 tax refund claim on a Range Rover imported from the UK nearly 17 years ago.
High Court Judge Alfred Mapia upheld a decision by the KRA and the Customs and Excise Appeal Tribunal (now the Tax Appeal Tribunal) rejecting the businessman’s tax claim.
“The invoice sets out the cost of the goods and also acts as a demand for payment after the successful sale of the goods. This is sufficient evidence of the ‘price due’. In this regard, I find that the findings of the court were consistent with paragraph 2(1) of the Fourth Schedule and were therefore not erroneous.” The judge said.
“Ultimately, I find that the respondent’s decision was lawful and consistent with the Fourth Schedule to the East African Community Customs and Administration Act 2004 as read with section 122 of the Act. I accordingly find that the appeal is without merit and dismiss it with costs,” Justice Mapia added.
Mr Mohan is the owner of alcohol manufacturer London Distillers and clothing manufacturer Manchester Outfitters Limited.
2007 conflict
The dispute dates back to 2007 when Mr Goliath bought a Range Rover from the UK. The tax on the vehicle was assessed at Sh5,365,371. The businessman then filed a recovery claim of Sh1,782,386 on March 12, 2008, which was rejected by KRA.
Mr Goliath’s assertion is that the car was purchased in the UK under the Purchase and Export Schedule regime, which allows a non-resident to purchase and use the car without incurring value added tax (VAT) charges.
The businessman said that the vehicle was purchased on October 30, 2007, and he took possession of it on November 12, 2007, and used it for three months. Mr Goliath said he later traveled to Kenya on 1 January 2008, the vehicle arrived on 6 March 2008 and was charged customs duties and excise duties amounting to Sh5,365,371.
He claimed that the court erred in using the transaction value method in assessing the tax due, yet the car had been used in the UK.
However, the tax man emphasized that if the customs value of the used vehicle is not known, the tax deduction method is applied using the current retail price.
“In this case, a five percent reduction should be applied in accordance with the customs routine order. The retail price was Sh8,300,000 and the appellant therefore overpaid Sh2,601,084.
However, KRA confirmed that customs clearance agents used the factory invoice to declare the transaction value. She said the calculation based on the documents was Sh1,759,138, including import duty, excise duty, value added tax and import declaration fee.
Justice Mapia defended the tax assessment carried out by KRA on Goliath’s imported Range Rover, saying it was stipulated in the EACCMA.
“I find that the basic method of valuing imported goods under Part I of the Fourth Schedule is in paragraph 2, which describes the method of assessing the transaction value. The transaction value method is based on the price actually paid or payable for the goods when sold for export to a partner country and as amended,” he said. Under the provisions of paragraph 9.
The judge added: “In other words, the price paid by the buyer or importer of the goods is what forms the basis for estimating the customs duties due on the goods.”