1.By a Notice of Motion dated 2nd December, 2021, the ex parte applicant herein, Ayan Tyres Limited, seeks the following orders:a.That the Honourable Court be pleased to issue an Order of Certiorari to remove into this Court and quash the decision by the Respondents contained in the letter dated 23rd August, 2021 requiring the Applicant to pay Kshs. 2,384,436/- on account of additional Import Duty allegedly due from the Applicant.b.That the Honourable Court be pleased to issue an Order of Prohibition prohibiting the Kenya Revenue Authority, whether by itself, its officers, employees and/or agents, from commencing, instituting or proceeding with any enforcement or prosecution actions against the Applicant or its directors and/or officers on account of demand contained in the letter dated 23rd August, 2021 and subsequent related letters issued to the Applicant.c.That the Honourable Court be pleased to grant the costs in the cause.
Ex Parte Applicant’s Case
2.The application was supported by an affidavit sworn by Abdullahi Adan Jimale, the ex parte Applicant’s Director and a Shareholder. According to him, the Applicant is a licenced trader who imports and sells different brands of tyres, among other activities contained in the companies Memorandum & Articles of Association. He averred that vide a letter dated 23rd August,2021, the Respondents informed the Applicant that they had conducted a Desk Audit of the Applicant’s custom entries for the period between 2016 to date which audit purportedly revealed several consignments of assorted tyres from supplies imported by the Applicant, which were wrongly classified under tax tariff code 4011.20.20 which attracts Import Duty at 10%. The Respondents indicated that the applicable tariff code for the tyres imported by the Applicant is 4011.10.00 which attracts Import Duty at the rate of 25%.
3.As a result, the Respondents demanded payment of short levy that included additional duties, taxes and interests in the sum of Kshs 2,384,436. On 1st October, 2021, the Respondents followed up the demand with a reminder. which was collected by the Applicant’s counsel at the Respondents’ offices on 18th November, 2021. According to the deponent, the letter dated 1st October, 2021 required the Applicant to pay a sum of Kshs 2,384,436 within seven (7) days.
4.The ex parte applicant complained that in so far as the audit stretches back to the year 2016, the same violates the Applicant’s constitutional right of fair administrative action under Article 47 of the Constitution and accused the Respondents of abusing its statutory power. It was averred that while the Respondents knew that they were making an administrative action that adversely affected the Applicant, the Respondents had an obligation under Article 47 of the Constitution to ensure its action was expeditious, efficient, lawful, reasonable and procedurally fair.
5.It was deposed that the Respondents acted irrationally by conducting audit of, inter alia, 2016 imports that subjected the Applicant to huge loses since those goods had been sold and the Applicant was unable to recover from the customers since the duty charged determines the final price of the products.
6.It was averred that the Respondents acted illegally in breach of section 4(4) of the Fair Administrative Actions Act and rules of natural justice by failing to accord the Applicant right to be heard and an opportunity to even participate in the computation process so as to ascertain how the final figures demanded was arrived at. It was therefore averred that the Respondents’ decision contained in the letter dated 23rd August, 2021 and a reminder letter dated 1st October, 2021 disappointed the Applicant’s legitimate expectation that it would be heard before adverse administrative decision was made. It further undermined the Applicant’s legitimate expectation that while the Respondents have powers to conduct audit, it must do so expeditiously and the long time that lapsed between the time transactions took place in 2016 and the demand of the payment of additional taxes was a long time for a prudent and efficient authority to discover a mistake.
7.The deponent lamented that the Respondents’ decision stretching back to 2016 transaction is irrational and does not meet proportionality test as it denies the Applicant recourse of recovering the additional taxes from the customers since those goods have been sold and the Applicant has lost an opportunity to adjust prices of its products in order to factor in the selling prices which would have included additional taxes.
8.It was averred that the Objection and request for review and a meeting by the Applicant vide a letter dated 15th November,2021 was declined and the adverse decision upheld. The ex parte applicant wondered how the Respondents arrived at the principal amount without the knowledge of the ex parte applicant and was of the view that had the Respondents agreed to meet with the Applicant, the Applicant would have known how figures were arrived at factoring in the initial payment.
9.According to the Applicant, the Respondents in breach of rules of natural justice did not seek clarification from the Applicant to verify that it did not import tyres for buses and lorries, which rate for those whose rim is over 17 inches is 10% under East Africa Community Common External Tariff (EAC/CET), Rules 2017, tariff code 4011.20.20, before arriving at its decision. It was its case that physical examination of the tyres and verification that indeed some tyres are those of lorries and buses that attract 10% Import Duty is not possible for the reason that owing to the long period taken by the Respondents to conduct audit, the same have been sold.
10.In opposing the application, the Respondents took up preliminary objections set out as follows:1.The Tax Procedures Act confers original jurisdiction upon the Tax Appeals Tribunal for tax disputes such as the one that is currently before this Honourable Court, and the High Court can only take up appellate jurisdiction in such an instance.2.The Application offends Sections 230 of the East African Community Customs Management Act, 2004, Sections 52, 53 & 56(2) of the Tax Procedures Act; Sections 7(1) (b) and 9(2) of the Fair Administrative Actions Act; Section 12 of the Tax Appeals Tribunal Act; Rules 3 and 5 of The Tax Appeals Tribunal (Appeals to the High Court) Rules 2015; Article 23 (2) of the Constitution of Kenya.
11.Based on the said objection, the Respondents prayed that the Application dated 2nd December 2021 be struck out with costs so that the Applicant can comply with the laid down procedure for challenging a tax decision.
12.It was submitted on behalf of the Respondents that Section 230 of the East African Community Customs Management Act, 2004 (EACCMA) provides that a person who is dissatisfied with the decision of the Commissioner may appeal to the Tax Appeals Tribunal and that Section 231 of the EACCMA provides for the establishment of the Tax Appeals Tribunal by each of the partner states of the East African Community. It was further submitted that Section 2 of the Tax Procedures Act sets down the object and purpose of the Act as follows: -1.The object and purpose of this Act is to provide uniform procedures for-a.consistency and efficiency in the administration of tax laws;b.facilitation of tax compliance by taxpayers; andc.effective and efficient collection of tax.2.Unless a tax law specifies a procedure that is unique to the administration of a tax thereunder, the procedures provided for under this Act shall apply.3.This Act shall be interpreted to promote the object of the Act.
13.The Respondents also referred to Section 3 of the Tax Procedures Act which defined an “appealable decision” in the following terms:-
14.According to the Respondent, the only reason why an “appealable decision” is distinguished from a “tax decision” is not that one of them is brought under the ambit of the Tax Procedures Act while the other is not but that both have distinct processes of challenging each within the Tax Procedures Act. For instance, the first line of challenging a “tax decision” is by lodging an objection. Therefore, a “tax decision” must graduate to an “appealable decision” before being lodged at the Tax Appeals Tribunal, otherwise it will be premature.
15.In the instant case, it was submitted that the Commissioner issued a review decision on 15th November 2021 and went further o advise the applicant its recourse to appeal the said decision with the Tax Appeals Tribunal. In the Respondent’s view, the review decision clearly falls within the meaning of an “appealable decision”, because it is definitely a decision made under a tax law as the second limb of the definition to an “appealable decision” states. It was submitted that an “appealable decision” begins its life in the Tax Appeals Tribunal pursuant to section 230 of the EACCMA as discussed above and Section 52 of the Tax Procedures Act which provides as follows: -Appeals of appealable decision to the Tribunal1.A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act, 2013 (No. 40 of 2013).2.A notice of appeal to the Tribunal relating to an assessment shall be valid if the taxpayer has paid the tax not in dispute or entered into an arrangement with the Commissioner to pay the tax not in dispute under the assessment at the time of lodging the notice.
16.In the Respondents’ view, even an appeal to the Tribunal is not valid unless the taxpayer pays the tax not in dispute. The Respondents reiterated the object and purpose of the Tax Procedures Act particularly, object (b) and (c) of Section 2(1) of the Tax Procedures Act which in its view especially capture the spirit quite aptly as facilitation of tax compliance by taxpayers and effective and efficient collection of tax.
17.It was submitted that the reason why a piece of legislation would want to create an environment where effective and efficient collection of tax is achieved is that the Respondents do not collect taxes for their own benefit; it is not a selfish pursuit for self-aggrandizement. The Respondents are agents of “the people”, and tax is imposed under Article 210 of the Constitution.
18.As regards the jurisdiction of this Court it was submitted, firstly, that the Tax Procedures Act, which is a legitimate limb of the Constitution, has established the procedure for challenging a decision made under a tax law. It was noted that if a taxpayer is dissatisfied by the decision of the Tax Appeals Tribunal, then pursuant to Section 53 the taxpayer can appeal to the High Court and if the taxpayer or the Commissioner (by extension) is dissatisfied with the decision of the High Court, then pursuant to Section 54 either party can appeal to the Court of Appeal and the right of appeal ends there. The Tax Procedures Act, however, provides under Section 56(2) that “An appeal to the High Court or to the Court of Appeal shall be on a question of law only.”
19.In the Respondent’s view, the danger of the High Court taking up original jurisdiction on such a matter is that it limits the right of appeal to only one, further it expands its jurisdiction from matters of law to matters of fact. What that means is that by taking up original jurisdiction, the High Court in effect makes nonsense of the Tax Procedures Act and the Tax Appeals Tribunal in one blow. In such a scenario, tax administration becomes unpredictable. It would even be absurd to argue the case in the High Court by quoting Sections of the Tax Procedures Act because those sections can in no way be binding concerning certain aspects of tax administration but only persuasive concerning others. And it is not just the Tax Procedures Act that sets down the procedure for challenging such a decision as the one the Commissioner made in the present case. The Fair Administrative Actions Act calls such a decision an administrative action and goes ahead to set down the procedure for challenging an administrative action.
20.It was submitted that it is for this reason that the emerging jurisprudence from the High Court’s Judicial Review section is that before a party applies for judicial review remedies in the High Court they must demonstrate that they have exhausted all internal mechanisms for challenging such a decision pursuant to Section 9(2) of the Fair Administrative Actions Act. Reference was therefore made to The Registered Trustees, Kenya Railways Staff Retirement Benefits Scheme vs. Chairman, Rent Restriction Tribunal & 99 Others  eKLR and Republic vs. Kenya Revenue Authority Ex-Parte New Frarims Wholesalers Limited & 3 Others  eKLR.
21.It was submitted that the question of procedure has been dealt with before in so many cases by this Court in inter alia, the following cases: -i.Rich Productions Ltd. vs. Kenya Pipeline Company & Another, Petition No. 173 of 2014:ii.Constitutional Petition Number 359 of 2013 - Diana Kethi Kilonzo vs. IEBC & 2 Others:iii.David Ramogi & 4 Others vs. The Cabinet Secretary, Ministry of Energy & Petroleum & 7 Others  eKLR:iv.John Harun Mwau vs. Peter Gastrow & 3 Others  eKLR:v.George Owino Mulanya & 4 Others vs. Achieng Odonga & Another  eKLR:
22.According to the Respondents, this is a tax dispute that cannot through some innovation be transformed into a judicial review application and that the East Africa Community Customs Management Act and the Tax Procedure’s Act has established a clear mechanism for addressing the dispute currently before this Court and that the forum of first instance is the Tax Appeals tribunal. Consequently, the Court was urged to strike out the Application with costs, so that the applicant can take the obvious path set down by law for addressing the current tax grievance.
Ex Parte Applicant’s Submissions
23.In its submissions, the x parte applicant contended that the Respondent’s action f conducting an audit that stretches back to the year 2016 and demanding taxes thereon violated the Applicant’s constitutional right of fair administrative action under Article 47 of the Constitution hence the Respondents are guilty of an abuse of statutory power. It was contended that due to the inaction of the Respondents for many years a legitimate expectation was created that the Respondents would not claim more VAT as to do so subjects the Applicant to serious injury since goods have already been sold and he cannot recover VAT being demanded by adjusting prices anymore. In support of the submissions the ex parte applicant cited the case of Republic vs. Kenya Revenue Authority Exparte Cooper K-Brands Limited (2016) eKLR.
24.As regards the Preliminary Objection, it was submitted that it does not confine itself with the facts and that the Respondents are under obligation to explain the delay to conduct audit for many years. Accordingly, in the absence of any justifiable grounds, the Respondents are deemed to be intended to exercise powers in order to achieve collateral purposes. The Preliminary Objection, it was submitted cannot be decided without verification of such facts.
25.According to the x parte applicant, the final decision of the Respondents does not rest on an issue whether or not the Respondents were legally entitled to collect the taxes due or not taxes were actually due. The decision rests on the process that was being adopted by the Respondents in the exercise of statutory obligation, an issue, not for an appeal but one that falls squarely within the judicial review jurisdiction.
26.The ex parte applicant submitted, that whereas the availability of an alternative remedy is a factor to be taken into consideration, the court ought not to sanitise a patently illegal action simply because there is right of appeal provided by the statute.
27.It was submitted that the provisions of the East African Community Customs Management Act, 2004 are not a bar to court’s intervention to remedy or sanitize patently illegal action.
28.Consequently, it was submitted that the Preliminary Objection is not merited and should be dismissed with costs.
29.This ruling is in respect of the preliminary objections. Though the Applicant has briefly dwelt on the merits of the application, in this ruling the Court will restrict itself to the preliminary objection. The said object, in a summary, is that this application was prematurely filed before this Court before the Applicant had exhausted the available remedies. In other words, the Respondents are relying on the doctrine of exhaustion of remedies as the ground for seeking that this application be struck out.
30.This exhaustion doctrine has been restated by the Court of Appeal in Geoffrey Muthinka Kabiru & 2 Others vs. Samuel Munga Henry & 1756 others  eKLR viz,
31.In the Matter of the Mui Coal Basin Local Community  eKLR the Court held that:
32.The doctrine was restated by the Court of Appeal in Geoffrey Muthinja & Another vs. Samuel Muguna Henry & 1756 Others  eKLR, where it was held that:-
33.Section 9(2), (3) and (4) of the Fair Administrative Action Act, No. 4 of 2015, a piece of legislation which the ex parte applicant has cited in support of its case, provides:(2)The High Court or a subordinate court under subsection (1) shall not review an administrative action or decision under this Act unless the mechanisms including internal mechanisms for appeal or review and all remedies available under any other written law are first exhausted.(3)The High Court or a subordinate Court shall, if it is not satisfied that the remedies referred to in subsection (2) have been exhausted, direct that applicant shall first exhaust such remedy before instituting proceedings under sub-section (1).(4)Notwithstanding subsection (3), the High Court or a subordinate Court may, in exceptional circumstances and on application by the applicant, exempt such person from the obligation to exhaust any remedy if the court considers such exemption to be in the interest of justice.
34.It is however my view that the onus is upon the applicant to satisfy the Court that he ought to be exempted from resorting to the available remedies.
35.As was held by this Court in Republic vs. Ministry of Interior and Coordination of National Government and Another ex parte ZTE Judicial Review Case No. 441 of 2013:
36.It was similarly held in Republic vs. National Environment Management Authority  eKLR, that where there is an alternative remedy and especially where Parliament has provided a statutory appeal procedure, it is only in exceptional circumstances that an order for judicial review would be granted. The Court of Appeal had this to say at page 15 and 16 of its judgment,
37.There is now a chain of authorities from the High Court as well as the Court of Appeal that where a statute has provided a remedy to a party, this Court must exercise restraint and first give an opportunity to the relevant bodies or State organs to deal with the dispute as provided in the relevant statute. This principle was well articulated by the Court of Appeal in Speaker of National Assembly vs. Njenga Karume  1 KLR 425, where it held that;
38.The same principle has been underlined in the cases of Kipkalya Kones vs. Republic & Another ex-parte Kimani Wanyoike & 4 Others (2008) 3 KLR (EP) 291, Francis Gitau Parsimei & 2 Others vs. National Alliance Party & 4 Others Petition No.356 and 359 of 2012.
39.It is now a ‘cardinal principle that save in the most exceptional circumstances, the judicial review jurisdiction would not be exercised and the court must not exercise it where there exist alternative remedy In Re Preston  AC 835 at 825D Lord Scarman was of the view that a remedy by judicial review should not be made available where an alternative remedy existed and should only be made as a last resort.
40.Mumbi Ngugi, J in Rich Productions Limited vs. Kenya Pipeline Company & Another , explained why the Court must be slow to undermine prescribed alternative dispute resolution mechanisms thus:
41.The gravamen of the Respondent’s objections is Section 229 of the East African Community Customs Management Act 2004 as read with section 51 of the Tax Procedures Act No. 29 of 2015. The former provides that:(1)A person directly affected by the decision or omission of the Commissioner or any other officer on matters relating to Customs shall within thirty days of the date of the decision or omission lodge an application for review of that decision or omission.(2)The application referred to under subsection (1) shall be lodged with the Commissioner in writing stating the grounds upon which it is lodged.
42.On the other hand, section 51 of the Tax Procedures Act No. 29 of 2015 provides as follows:51. (1)A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.(3)A notice of objection shall be treated as validly lodged by a taxpayer under subsection (2) if—(a)the notice of objection states precisely the grounds of objection, the amendments required to be made to correct the decision, and the reasons for the amendments; and(b)in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute.
43.In this case, the ex parte applicant’s grievances are that in so far as the audit stretches back to the year 2016, the same violates the Applicant’s constitutional right of fair administrative action under Article 47 of the Constitution and amounts to abuse of power. Under the said Article, it is contended, the Respondents were enjoined, while making an administrative action that adversely affected the ex parte Applicant to ensure its action was expeditious, efficient, lawful, reasonable and procedurally fair. In this case the failure to act expeditiously and efficiently, it was contended, amounted to irrationality, as the inaction, since 2016 has exposed the Applicant to huge loses since the goods, the subject of taxation, had been sold and the Applicant is unable to recover, from the customers, the duty charged which determines the final price of the products. This action by the Respondent, it was contended violated the ex parte applicant’s legitimate expectation informed by the long delay in taking the said action that no such action would be taken. It was further alleged that the Respondents acted illegally in breach of section 4(4) of the Fair Administrative Actions Act and rules of natural justice by failing to accord the Applicant right to be heard and an opportunity to even participate in the computation process so as to ascertain how the final figures demanded was arrived at.
44.It is clear from the foregoing that the ex parte applicant is complaining about the power of the Respondents to demand for payment of taxes in the circumstances of the case. In the case of H.C.Petition No. 203 of 2012; Kapa Oil Refineries Limited –vs- The Kenya Revenue Authority, The Commissioner of Customs Services and The Attorney General, the Lenaola, J (as he then was) had this to say at page 13:
45.Similarly, in this case, the issue revolves around the determination as to whether the Respondents ought to lawfully demand for the taxes in question taking into account the time lapse. That is a matter that ought to be dealt with pursuant to Section 229 of the East African Community Customs Management Act 2004 as read with section 51 of the Tax Procedures Act No. 29 of 2015.
46.I associate myself with the position of the Court of Appeal in Kisumu in Eliud Wafula Maelo vs. Ministry of Agricukture and 3 Others  KLR where it was held that:
47.In this case no reasons have ben advanced why the applicant opted to bypass the prescribed alternative mechanisms which in my view are not any less appropriate, convenient, effective and/or beneficial. In the premises I find that this Notice of Motion is misconceived and incompetent for contravening the doctrine of exhaustion of remedies. Consequently, I do not wish to deal with the other matters raised herein in order not to prejudice any proceedings that might be commenced under the said provisions.
48.In the result the Notice of Motion dated 2nd December, 2021 is struck out with costs to the Respondent. Orders accordingly.