1. On 11th December 2006 Keroche Industries Limited which later changed it’s name to Keroche Breweries Ltd filed Judicial Review Application proceedings being Nairobi H.C. Miscellaneous Application No. 743 of 2006: Republic-versus-Kenya Revenue Authority and Five Others, Ex-Parte Keroche Industries Limited.

2. The Application challenged the Kenya Revenue Authority decision to classify Keroche’s fortified wine products under Harmonized System (H.S) Code Tariff heading 22.04 instead of under Code Tariff Heading 22.06 in respect of Excise Duty, Corporation and withholding Income Tax and Value Added Tax (VAT) in respect of sales and trading activities covering the years of income 2002 to 2006.

3. The re-classification of Keroche’s products resulted in tax assessments as follows:-

a) On Income Tax, Excise Duty and Withholding Tax against the Keroche for a total sum of Kshs. 802,919,447.00

b) On Value Added Tax, Interest and penalty thereof against Keroche for the total sum of Kshs. 305,094,183.00.

4. On 6th July, 2007 the High Court delivered judgment in favour of Keroche and quashed the assessment notices by KRA.

5. KRA was aggrieved with the decision of the High Court the KRA appealed to the Court of Appeal through Appeal Nairobi Civil Appeal No. 2 of 2008: Kenya Revenue Authority and Five Others versus Keroche Industries Limited.

6. The Appeal was on the grounds that the Court failed to:-

a) Take into account the existence of an appeal mechanism where the merits of the case could be canvassed,

b) Recognise that the Court lacked jurisdiction to entertain the dispute before the exhaustion of that mechanism and ISO 9001:2015 CERTIFIED PUBLIC

c) Stop delving into the merits of the matter when the issue before Court on procedural impropriety.

7. On 3rd February 2017, the Court of Appeal delivered its judgment in favour of KRA and in the said judgment, the Court of Appeal gave orders setting aside the High Court decision dated 6th July 2007 and directed KRA to issue reasonable notices in regard to the tax assessments accompanied by supporting documents to Keroche.

8. Following the decision of the Court of Appeal on 3rd February 2017 KRA issued Keroche with assessments as follows;

a) Excise Tax Assessment for period 2002-2005 of Kshs. 467,704,167.00;

b) Value Added Tax Assessment for the period 2002-2005 of Kshs 388,594,657.00; and

c) Corporation Tax and withholding Tax Assessment for the period 2002 to 2005 of Kshs. 737,333,959.00. This sum was subsequently lowered to kshs. 333, 818, 737.20 after the Tax Appeals Tribunal found fault with the Authority for having levied interest and penalty when the dispute was pending before the Court of Appeal and the High Court.

9. Keroche did not agree with the assessments issued by KRA and objected to the same on 2nd July 2017 as is provided for under the Tax Procedures Act.

10. KRA considered Keroche’s objection and issued an objection decisions to Keroche on 3rd August 2017 confirming the assessment.

11. Keroche exercised its right by filing Appeals before Tax Appeals Tribunal as follows: 

a) Nairobi TAT No 137 of 2017: Keroche Breweries Limited versus Commissioner of Domestic Taxes in relation to excise duty assessed at Kshs. 467,704,167.00; 

b) Nairobi TAT No 138 of 2017: Keroche Breweries Limited versus Commissioner of Domestic Taxes in relation to Value Added Tax assessed at Kshs 388,594,657.00. 

c) Nairobi TAT No 139 of 2017 : Keroche Breweries Limited versus Commissioner of Domestic Taxes in relation to corporation ISO 9001:2015 CERTIFIED PUBLIC income tax and withholding income tax of Kshs 333, 818,737.20

Totalling to Kshs. 1,190,117,561.00

12. The Appeals were heard by the Tax Appeals Tribunal and the Tax Appeal Tribunal rendered its judgment on 9th March 2020 and upheld the KRA’s tax demands except for the aspect of interest and penalty levied by KRA in the period when the dispute was before the High Court and Court of Appeal respectively.

13. The Tax Appeals Tribunal also released the judgment with regard to another set of three Appeals, filed in 2015 & 2017 where the dispute related to the correct tax treatment of the Appellant’s Vienna Ice Brand of Vodka from the year 2012. Whose total value at Kshs. 7,926,718,424.00

14. The Tribunal in the appeals on Vienna Ice Brand Vodka held that the Keroche was involved in the compounding of spirit which amounts to manufacture within the meaning of the Excise Duty Act, 2015 and Customs and Excise Act, CAP 472(repealed) and as such Vienna Ice was a distinct product for which Excise Duty and VAT were payable.

15. The Taxes in dispute in the six appeals are as follows:

a) As relates to the HS Code for fortified wines Kshs 1,190,117,561.00

b) Regarding Vienna Ice Vodka Kshs 7,926,718,424.00

The total tax demanded is Kshs. 9,116,835,985.00.

16. The Tax Appeal Tribunal having vindicated KRA in its tax demands to Keroche and on 11th March 2020 commenced enforcement measures against Keroche. Keroche has since moved to the High Court on 16th March 2020 when the Court gave Keroche a reprieve against the enforcement measures by KRA by granting Keroche stay orders against KRA’s enforcement measures on condition that Keroche pays to KRA Kshs. 500,000,000 on account of the owing tax. 

Commissioner, Legal Services & Board Co-ordination – PM Matuku