The Kenya Revenue Authority (KRA) is set to collect tax of Kshs. 517,755,155.00 following a decision by the Tax Appeals Tribunal on 23rd April 2020 in an appeal filed by Mastermind Tobacco (K) Limited in 2016 against a decision by KRA to demand taxes.
By a letter dated 26th March 2018, KRA assessed Mastermind Tobacco (K) Limited to VAT of Kshs. 90,225,155 and Excise Duty of Kshs. 427,500,000 on account of sales of cigarettes that were classified as exports and hence zero rated but the taxpayer failed to provide proof of exports for the consignments. Mastermind Tobacco objected to the findings by KRA and KRA gave an Objection Decision on 22nd May 2018.
Aggrieved by the decision of the Commissioner to confirm the assessment, Mastermind Tobacco (K) Limited appealed to the Tax Appeals Tribunal. The Tax Tribunal affirmed KRA’s position on the assessment in its judgment delivered on 23rd April 2021.
In arriving at its finding, the Tribunal held that Mastermind Tobacco (K) Limited failed to discharge its burden of proof that it actually exported the cigarette consignment in question. The Tribunal noted that exportation of goods is a process which required Mastermind Tobacco (K)Limited to produce evidence of documents acquired and presented at every stage of the process; from the country of origin, to the transit state and finally at the country of destination.
In upholding KRA’s decision to assess taxes for lack of proof of exportation, the Tribunal found that KRA is empowered under the EACCMA regime to request for the production of all the documents used at every stage of the export process.
The Tribunal further found that the KRA’s request for the production of export documents was neither unreasonable, unfair nor a violation of Mastermind Tobacco Ltd’s rights under Article 47 of the Constitution of Kenya, 2010.