Commissioner of Customs & Border Control & another v Pernod Richard Kenya Limited [2019] KECA 756 (KLR)

Court of Appeal

10 May 2019

RNR.N. Nambuye SKS. Gatembu Kairu AMA.K. Murgor

2,563 words in judgment

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The bottom line

Kenya's Court of Appeal refused to halt a High Court order against KRA customs because the Commissioner had previously accepted company undertakings as security, so the appeal wouldn't be worthless.

What this practically means

Executive summary

The Commissioner of Customs and Border Control and the Commissioner of Investigations and Enforcement moved the Court of Appeal under rules 5(2)(b) and 42 of the Court of Appeal Rules seeking a stay of execution of a High Court ruling by Okwany, J. delivered on 21st November 2018 in Nairobi High Court Petition No. 232 of 2018, together with a stay of proceedings, pending an intended appeal. The High Court had restrained the applicants from imposing value uplifts on the respondent's imported products, conditioned on the respondent providing undertakings for taxes found payable by the Tax Appeals Tribunal. The dispute concerned a demand of Kshs. 697,149,482 in uplifted tax following a post clearance audit, with the respondent's appeal against the assessment pending before the Tribunal. The applicants argued that section 107(1) of the EACCMA permitted security only by bond or cash deposit and not by undertaking, and that loss of revenue would render the appeal nugatory. The court, applying the principles in Stanley Kang’ethe Kinyanjui vs Tony Keter, found the intended appeal arguable on the scope of section 107(1), but held that the nugatory threshold was not met: the Commissioner had previously accepted undertakings from the respondent as security, and had not shown any deterioration in the respondent's financial capacity to pay the assessed duties. The motion was dismissed with costs to abide the outcome of the intended appeal.

Key legal issues

Whether the intended appeal was arguable

Holding

The intended appeal was arguable; whether an undertaking is envisaged under section 107(1) of the EACCMA and whether security should be demanded where value uplifts have already been imposed are matters of a serious nature

Reasoning

The court identified arguable questions on the statutory forms of security under section 107(1) of the EACCMA, which specifies bond or cash deposit. Whether an undertaking fits within the provision, and whether security is needed where value uplifts are already imposed, raise matters of consistency and certainty in trade and commerce, meeting the arguability threshold.

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Whether the appeal would be rendered nugatory if stay were declined

Holding

The appeal would not be rendered nugatory because the Commissioner had previously accepted undertakings from the respondent as security and had not shown any change in the respondent's financial capability

Reasoning

The respondent had annexed undertakings dated 17th September 2013 and 25th June 2018 accepted by the 1st applicant. Having accepted such undertakings, nothing stopped the Commissioner from accepting further undertakings pending the Tribunal's determination. The applicants did not demonstrate that the respondent's financial capabilities had diminished such that it risked defaulting on the assessed duties.

p. 3

Legal principles established

An application under rule 5(2)(b) requires the applicant to demonstrate that the intended appeal is arguable and that, if successful, it would be rendered nugatory unless a stay is granted; a single arguable ground suffices
In dealing with rule 5(2)(b) applications, the Court of Appeal exercises original and discretionary jurisdiction, which does not constitute an appeal from the trial judge's discretion

Court orders

1.The Notice of Motion dated 28th November 2018 is dismissed
2.Costs to abide by the outcome of the intended appeal

Authorities

Legislation

Appellate Jurisdiction Actsections 3, 3A and 3B
Court of Appeal Rulesrules 5(2)(b) and 42
East African Community Customs Management Actsection 107
Tax Procedures Actnot specified

Cases cited (3)

Commissioner of Customs vs Anil Doshi
[2007] eKLR
Stanley Kang’ethe Kinyanjui vs Tony Keter & 5 Others
Civil Application No. NAI. 31/2012
Ruben & Others vs Nderitu & Another
(1989) KLR 459

On appeal from: High Court at Nairobi; Nairobi High Court Petition No. 232 of 2018
Jurisdiction invoked: Sections 3, 3A and 3B of the Appellate Jurisdiction Act and rules 5(2)(b) and 42 of the Court of Appeal Rules

Key timeline

Practical implications

Frequently asked questions

Cite this brief

Caselaw, "Commissioner of Customs & Border Control & another v Pernod Richard Kenya Limited [2019] KECA 756 (KLR)", Case Analysis (2019). Civil Application No. 357 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/756/eng@2019-05-10

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.