Billionaire industrialist Mohan Galot has lost an appeal against the Kenya Revenue Authority (KRA) for rejecting his Sh1,782,386 tax refund claim on a Range Rover vehicle imported from the United Kingdom (UK) nearly 17 years ago.
High Court Judge Alfred Mabeya upheld a decision by the KRA and the Customs and Excise Appeal Tribunal (now the Tax Appeal Tribunal) to reject the businessman’s tax claim.
“An invoice sets out the cost of goods and also acts as a claim for payment following a successful sale of goods. This is sufficient evidence of the ‘price payable’. In this regard, I find that the Tribunal’s findings were in accordance with Paragraph 2(1) of the Fourth Schedule and was therefore not erroneous” the judge said.
“In the upshot, I find that the respondent’s decision was legal and in accordance with the 4th Schedule of EACCMA (East African Community Custom & Management Act), 2004 as read with Section 122 of the Act. Accordingly, I find that the appeal is without merit and dismiss the same with costs,” Justice Mabeya added.
Mr Mohan is the owner of alcohol maker London Distillers and garment manufacturer Manchester Outfitters Limited.
2007 dispute
The feud dates back to 2007 when Mr Galot purchased a Range Rover from the UK. The tax on the vehicle was assessed at Sh5,365,371. The businessman then lodged a claim for a refund of Sh1,782,386 on March 12, 2008, which was rejected by KRA.
Mr Galot’s assertion is that the motor vehicle was purchased in the UK under the Purchase Export Schedule Scheme, which allows a non-resident was allowed to buy and use a vehicle 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 Galot said he later travelled back to Kenya on January 1, 2008, and the vehicle arrived on March 6, 2008, and was charged customs and excise duty of Sh 5,365,371.
He contended that the tribunal erred in using the transaction value method in assessing the tax payable, yet the vehicle had been used in the UK.
The taxman, however, maintained that in a case where the custom value of a used vehicle is not known, the deductive method of taxation is applied using the current retail price.
“That in this case, five percent depreciation ought to apply as per the Customs routine order. The retail price was Sh8,300,000 and that therefore the appellant had overpaid Sh2,601,084,” court filings stated.
KRA, however, reiterated that the customs clearing agents used the factory invoice to declare the transaction value. It said that the computation based on the documents was Sh1,759,138, comprising the import duty, excise duty, VAT and import declaration fee.
Justice Mabeya defended KRA’s tax valuation on Mr Galot’s imported Range Rover, saying it was provided for in the EACCMA law.
“I find that the primary method of valuation of imported goods under Part I of the Fourth Schedule is found in paragraph 2, which prescribes the transaction value method of valuation. The transaction value method is based on the price actually paid or payable for the goods when sold for export to a Partner State and as adjusted under the provisions of paragraph 9” he said.
“In other words, it is the price paid for the goods by the buyer or importer which forms the basis for assessing the customs duty payable on the goods” the judge added.
