Troubled Mastermind Tobacco (K) Ltd, currently under administration by I&M Bank over undisclosed debts, has lost a bid to quash a Sh517.75 million tax claim by the Kenya Revenue Authority (KRA) over an export cigarette consignment suspected of being smuggled. Dumped in Kenya.
High Court Judge Alfred Mabia said the mastermind company had failed to prove that the shipment had reached Burundi and was therefore liable to pay taxes to KRA.
“The appellant failed to prove how the consignment was sealed in Nairobi and arrived in Burundi on the same day. The appellant also did not dispute the evidence provided by the Burundian Revenue Authority as well as the Uganda Revenue Authority,” the judge said and upheld an earlier decision by the Tax Appeal Tribunal (TAT).
“Based on the above, the court finds no error on the part of the arbitral tribunal. The appellant did not object to the evidence presented by the respondent before the court. Judge Mapia said: “The burden of proof was not met, and in light of these findings, the court finds no basis for appeal.” “.
The dispute arose due to a raid on the tobacco company’s headquarters by the National Police Service in 2016, during which a consignment of cigarette packs was confiscated on suspicion that they had been dumped on the local market rather than exported.
The mastermind submitted a report to the KRA on January 10, 2017, detailing the status of the seized consignment. KRA assessed the consignment on March 28, 2018, and filed a tax claim amounting to Sh517,755,155 against the company.
However, the cigarette company objected to the tax demand and moved to the TAT on May 5, 2018 for compensation.
In its ruling on April 23, 2021, the court sided with the KRA prompting the mastermind to go to the Supreme Court on May 3, 2021, hoping to block the tax demand.
Mastermind said it sold export cigarettes to pre-qualified dealers when one of the criteria was met.
The company claimed that customers based in Burundi and Congo paid for the goods and sent their agents to collect the goods from its premises and the shipments were loaded onto vehicles sent by the customers for transportation.
“At this stage the balance of proof returned to the appellant to prove that the shipment had indeed been delivered to its intended destination. By failing to do so, the burden had not been eliminated and, for that reason, I agree with the court’s position on this issue,” Justice Mapia said.
Mastermind, owned by the late businessman Wilfred Murungi, stopped producing cigarettes in June 2023 and was later placed into administration by I&M Bank over debt.
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