H Young & Co (EA) v County Government of Lamu (Civil Appeal E033 of 2021) [2024] KECA 359 (KLR)
The bottom line
#Kenya's Court of Appeal ruled Lamu County couldn't charge cess on soil and murram because those items weren't listed in its Finance Act.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the Lamu County Finance Act, 2016 provides for levying of cess on soil and murram
- 2.Whether the learned judge rightly found that the respondent was entitled to levy cess on the excavation of murram for the construction of the Garsen-Witu-Lamu road
Key legal issues
#Whether the Lamu County Finance Act, 2016 authorises the levying of cess on soil and murram
The appeal is allowed; the demand for cess on soil and murram was unlawful and unconstitutional because they are not listed as cessable items under the Fourth Schedule to the Lamu County Finance Act, 2016.
Section 2 of the Act expressly defines cess as fees charged for goods specified in the Fourth Schedule. The court adopted a literal interpretation, examined the Fourth Schedule (land-based fees) and the Fifth Schedule (market produce and services), and found neither includes soil or murram for road construction. The respondent's reliance on the Second Schedule (permit/license fees) was rejected because the definition of cess makes no reference to the Second Schedule. The demand therefore lacked legislative authority contrary to Article 210(1) of the Constitution.
Whether the Second Schedule to the Lamu County Finance Act, 2016 can support a demand for cess on construction materials
No. Cess cannot be levied on items other than those listed in the Fourth Schedule because the statutory definition of cess does not refer to the Second Schedule.
The respondent argued that items 1173, 1174 and 1175 to 1201 of the Second Schedule, covering permit and license fees for construction materials, authorised the cess demand. The court held that the definition of cess under section 2 is confined to the Fourth Schedule, so items in the Second Schedule, which concerns permit and license fees for businesses, cannot be the basis of a cess demand. The trial judge's contrary conclusion was a misdirection warranting appellate interference.
The applicable approach to statutory interpretation in tax and revenue matters
Where statutory words are clear and unambiguous, a literal interpretation applies; tax demands must fall within the terms of the statute without ambiguity, and any ambiguity is for the legislature to remedy.
Drawing on the Supreme Court's purposive approach in Munya, the Reserve Bank of India text-and-context principle, the Swedish Match literal rule, and the Court of Appeal's own strict-construction jurisprudence in tax matters (Barclays Bank), the court held that since section 2 of the Act unambiguously confines cess to the Fourth Schedule, the definition must be construed literally and the demand must fall squarely within the statute. Ambiguity cannot be cured by judicial intendment.
Legal principles established
#- A county government may only impose a tax or levy through legislation, and a cess demand must fall within the items expressly specified in the statute; where the statutory definition of cess limits it to goods in a specified schedule, items outside that schedule are not cessable.
- Where a statute defines a term with explicit reference to a particular schedule, the statutory definition must be construed literally and cannot be expanded to cover items not listed in that schedule.
- Levying a tax or cess without supporting legislation is unlawful and unconstitutional under Article 210(1) of the Constitution.
Court orders
#- 1.A declaration that the respondent's demand for cess fees from the appellant in respect of soil for the Garsen-Witu-Lamu road project, which is not a cessable item under the Lamu County Finance Act, 2016, is unlawful, unconstitutional, null and void
- 2.A declaration that the actions of the respondent in continuing to levy or charge cess fees for soil used in the construction of the Garsen-Witu-Lamu road project without any supporting legal framework expressly violates the provision of the Constitution
- 3.A Prohibitory Injunction to stop the respondent from levying or charging cess fees for soil for the Garsen-Witu-Lamu road project in the area of its jurisdiction until such time as they have enacted the supporting legal framework
- 4.A mandatory injunction to stop the respondent from levying or charging cess fees for soil for the Garsen-Witu-Lamu road project in their area of jurisdiction until such time as they have enacted the supporting legal framework
- 5.Costs of the appeal to be paid to the appellant
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court
- Not stated in the judgment
- Jurisdiction invoked
- First appeal to the Court of Appeal against a decision of the High Court
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
In sum, we find that the appeal is merited and is hereby allowed. Tthe judgment of the High Court dated 3rd June 2021 is hereby set aside and substituted therefor
A Prohibitory Injunction is hereby issued to stop the respondent from levying or charging cess fees for soil for the Garsen-Witu-Lamu road project in the area of its jurisdiction until such time as they have enacted the supporting legal framework
the County government’s demand for payment of cess on items outside the Fourth Schedule is unenforceable since such items are not cessable.
since soil or murram are not included within the items specified in the Fourth Schedule, any demand for payment of cess by the respondent on soil or murram was unlawful and unconstitutional.
We are therefore enjoined to adopt a literal interpretation of the provision, and to construe section 2 as meaning that cess is only to be imposed to the items in the Fourth Schedule.
Issues in the judgment
#The judgment appears to contain a typographical error where it concludes that soil and murram ARE cessible under section 6, apparently contradicting its own reasoning and holding elsewhere that they are not cessible.
A typographical error in the disposition paragraph ('Tthe').
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "H Young & Co (EA) v County Government of Lamu (Civil Appeal E033 of 2021) [2024] KECA 359 (KLR)", Case Analysis (2024). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/359/eng@2024-03-22
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.