Commissioner of Custom Services v Kenya Petroleum Refineries Limited

objections, and the correspondences culminated in the decision dated 31st January, 2012, in which the Commissioner rejected the Renery’s objection and demanded the payment of the outstanding taxes within 14 days, failing which the Commissioner threatened to take enforcement measures. 4. This is what led to the judicial review application, in which the Renery, as the ex-parte applicant, sought the orders of judicial review arguing that since its incorporation in 1960, it had always been recognized as a bonded warehouse; that a customs ocer was always stationed at the Renery; that the Commissioner had issued instructions to his sta, which instructions were copied to the Renery, that oil removed from the renery is not charged with duty until delivery for home consumption; that oils used in the renery whether received as such, or produced in the plant, are not charged with duty; and that the instructions were in line with Section 51(1)(d)(i) of the EACCM Act, which specically states that duty was only chargeable on goods produced from crude petroleum, once they are delivered from the Renery. 5. The Renery contended that the Commissioner had on a monthly basis received returns showing the crude oil consumed by the Renery in its premises in the processing of crude oil, and had also carried out numerous tax audits during its 45 year period of operation; that the Commissioner has never questioned the Renery’s use of the fuel; that the Commissioner created a legitimate expectation that duty would not be payable on the fuel oil used by the Renery during the rening process; and that it was unfair and unreasonable for the Commissioner to demand payment of the tax, penalties, and interests, on the fuel oil used by the Renery, without any issue having been raised before. 6. The Commissioner opposed the application for judicial review through a replying adavit sworn by Benson Kisilu (Benson), an Assistant Commissioner in-charge of Petroleum Monitoring Unit Kilindini, Mombasa. Benson averred that the fuel oil used by the Renery, to run its furnaces and boilers, without payment of duty, amounted to local consumption of imported goods. He disclosed that since August, 2005, the Renery had consumed more than 183,276,621 M3 of fuel, without any payment of duty, or exemption, and this was contrary to section 50(1)(a) of the EACCM Act 2004, which provides for payment of taxes for goods locally consumed. 7. In addition, Benson deposed that according to Section 51(1)(d)(i) of the EACCM Act, taxes should be paid for all rened or partly rened products, if they are consumed locally, having been removed from a bonded warehouse, for purposes of home consumption. He asserted that the use of the fuel oil, by the Renery, in the rening process, amounted to home use, as envisaged by section 2 of the EACCM Act and section 2 of the Customs and Excise Act, Cap 472 Laws of Kenya, and as such taxes ought to be paid. 8. Further, Benson deposed that even though the fuel oil used by the Renery in the renery process is not tested and certied for use, the fact that other oil marketing companies allowed the Renery to wholly or partly use the rened products to run their machines/boilers, did not exempt the Renery from payment of taxes, since the oil marketing companies lacked the legal mandate or power to exempt the Renery from payment of taxes, as this was the preserve of the Minister for Finance, under section 138 of the Customs and Excise Act. Benson, therefore, maintained, that the Commissioner was statutorily mandated to demand the payment of the taxes of Kshs. 1,633,968,090.00. 9. In his ruling, the learned Judge of the High Court, found in favour of the Renery, and allowed the prayers sought. The learned Judge held that the Commissioner acted unfairly by overlooking the previous position regarding the Renery’s liability to pay taxes; that the Commissioner did not notify the Renery of its intention to reverse its earlier position on the Renery’s liability to pay taxes where the fuel oil was consumed in the furnaces and boilers, to run the Renery’s machinery; and that the decision of the Commissioner was arbitrary and contrary to the Renery’s legitimate expectation. https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 2

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10. In its appeal before us, the Commissioner faults the learned Judge on grounds inter alia, that the Judge erred in nding that the Commissioner violated the Renery’s legitimate expectation; in nding that the fuel oil consumed in boilers and furnaces, ought not to be taxed; in nding that there was no sucient notice of intention to reverse the Renery’s liability to pay tax; in failing to nd that the use by the Renery of the fuel oil, in the Renery process, amounted to home use; in failing to nd that all rened and partly rened products, removed from a bonded warehouse for purposes of home consumption, was taxable; in failing to nd that legitimate expectation cannot arise contrary to the express provisions of the law; and in failing to nd that legislation on customs administration had changed over time, including change in the EACCM Act, under which the exemption was granted to the Renery on 1st January, 1965, and thus the exemption was extinct. 11. The Commissioner led written submissions in support of the appeal, through his advocate D.O. Ontweka, in which two issues were raised. We reproduce the issues herein verbatim. i. Whether the learned Judge erred in law and in fact, in holding that the appellant’s decision violated the respondent’s legitimate expectation. ii. Whether the learned Judge erred in law and in fact/misdirected himself, by failing to nd the concept of local use and supply, as per EACCMA S. 2, S. 51 and S. 2 of Customs and Exercise Act, Cap 472 (repealed) (sic). 12. In regard to the rst issue, the Commissioner’s counsel submitted that there was no legitimate expectation created by the Commissioner to the Renery since there cannot be a legitimate expectation which is in contradiction to the law. Counsel cited several authorities in support of its submissions, including: Republic -vs- Kenya Revenue Authority ex-parte Shake Distributors Limited HC Misc. Civil Application No. 359 of 2012; and HWR Wade and CF Forsyth in “Administrative law” by HWR Wade and CF Forsyth at Pages 449 to 450. 13. Counsel argued, that to grant the order prohibiting the Commissioner from enforcing the collection of the tax claimed, would act as an injunction restraining the government from performing its statutory duties, and that the Court ought not to prohibit the Commissioner from collecting lawful taxes. 14. In regard to the second issue, it was noted that the learned Judge declined to determine or unravel what the phrase “delivered from the Renery for home consumption” means, indicating that it was a matter that should be resolved through the Tax Appeals Tribunal or the High Court. It was argued for the Commissioner, that Article 210 of the Constitution provides that no tax or licensing fee, may be imposed, waved or varied except as provided by legislation, and therefore, the Commissioner had the mandate under the law to ensure that taxes are paid according to the legislation. The Court was urged to nd in favour of the Commissioner, and allow the appeal so that the Commissioner could carry out his duties of collection of taxes from the Renery. 15. Counsel argued that the Renery’s legitimate expectation does not embrace the rule of law. In support of this proposition, counsel cited the following dicta by Nyamu, J (as he then was) in Keroche Industries Limited vs Kenya Revenue Authority & 5 others [2007] eKLR: “ What matters is whether the amount is lawfully due and whether the law allows its recovery. It is not a question of impression or perception of what is owed. Instead, it is what if anything is owed under the relevant law and whether its assessment and recovery is permitted by the applicable law. If rightly due, the huge amount notwithstanding, the court must uphold the right of recovery regardless of its consequence to the respondent, and if not due under the https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 3

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law, the court must not hesitate to disallow it and must disallow it to among other things to uphold both the law, the integrity of the rule of law.” 16. The Renery also led written submissions through its advocates, Kaplan & Stratton Advocates. Reproduced herein are the ve issues identied by the Renery for determination. a. Did the appellant’s instructions issued in 1965 create a legitimate expectation that oils used in the Renery would not be charged with duty? b. Did the conduct of the appellant in not challenging the respondent’s use of the fuel oil since the Renery began its operations create a legitimate expectation that the oils used in the Renery would not be charged with duty? c. Was there lack of legal certainty and predictability in the appellant’s actions? d. If the answer to (a), (b) and (c) above are yes, did the Honourable Judge correctly decide that the respondent’s legitimate expectation had been violated? 17. With regard to the rst issue, the Renery submitted that the Commissioner gave instructions to its sta in 1965, which instructions were specically copied to the Renery. The instructions were clear that as oil was used within the bounds of the Renery, duty was not payable. That the words “delivered from the Renery” used in Section 3(3) of the Customs Tariffs Act are the same words as those used in the proviso to Section 51(1)(d)(ii) of the EACCM Act, except that in Section 3(3) the words were “delivered from the Renery for home use” while in Section 51(1)(d)(ii), the words were “delivered from the Renery for home consumption”. 18. The Renery argued that the words “home use” and “home consumption” were the same, and therefore oil was used duty -free, in the Renery, for rening, consumption for making heat, light or power, or propelling Renery machinery. The Renery added that the Commissioner had failed to prove the law, which was amended, and that, duty was not due, as the fuel oil was used to run the Renery’s boilers, and therefore it was oil used before it was released from the bonded warehouse. 19. In regard to the second issue, the Renery asserted that legitimate expectation was created by the Commissioner’s subsequent conduct, when he did not demand any duty on the fuel oil used by the Renery to run its furnaces and boilers, and that the Commissioner did not dispute that it was aware that the Renery had for a period of 45 years, been using duty free oil to run it furnaces; that the Commissioner acted in an unpredictable and an uncertain manner in demanding the payment of duty, on fuel oil, despite having issued instructions to its sta that fuel oil used in heating purposes and for operating machinery within the Renery premises could be used duty free. It was argued that the Judge was correct in nding that the manner in which the Commissioner acted was unfair and arbitrary, since the decision had been in force for over 45 years. That the amount of Kshs.1.6 billion demanded was a colossal amount which would have catastrophic eect, not only on the Renery, but on all businesses in Kenya, as the demand would shut down the Renery, which is the only oil renery in East Africa. 20. In response to the Renery’s submissions, the Commissioner led a rejoinder, by way of further submissions. The Commissioner submitted that the High Court, having declined to unravel the phrase “delivered from Renery for home consumption” because it was a matter which should be properly resolved either through an appeal to the Tax Appeal Tribunal or the High Court, the High Court could not proceed to interrogate the doctrine of legitimate expectation as submitted by the Renery; that the High Court did not answer the question whether the Commissioner could grant a tax exemption which is unlawful; and legitimate expectation could only arise within the Commissioner’s lawful mandate. The Court was therefore urged to allow the appeal. https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 4

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21. We have carefully considered this appeal, the contending submissions, the authorities cited and the law. This being a rst appeal, our duty is to consider and re-evaluate the facts which were before the trial court, and come to a conclusion whether in the circumstances, the learned Judge of the High Court properly exercised his discretion in issuing the orders of judicial review that was sought by the Renery. 22. The facts are substantially not in dispute. The Renery is a bonded warehouse, and has since the year 1965 been using crude oil kept in its premises, for running its machinery for the purpose of rening crude oil, for oil marketers. The Renery has not been paying any duty on the crude oil used for running its machinery for the purpose of rening the crude oil. This is pursuant to directives that the Commissioner had given to his sta in 1965. The arrangement remained in force until 5th December, 2011 when the Commissioner wrote the letter dated 5th December, 2011, demanding duty on the crude oil used by the Renery in rening crude oil from 2005, and thereafter followed up with the decision dated 31st January, 2012, subject of the review application. 23. Three main issues arise in determining this appeal. These are: whether in the undisputed circumstances, there was legitimate expectation on the part of the Renery that it would continue using crude oil within its premises’ duty free, for purposes of running its machinery for rening crude oil; whether the learned Judge having declined in his judgment to unravel the phrase “delivery from the Renery for home consumption”, used in Section 51(1)(d)(ii) of the EACCM Act, could interrogate the applicability of the doctrine of legitimate expectation to the renery in regard to the use of crude oil duty free; and whether the Commissioner’s decision requiring the payment of taxes went counter to the legitimate expectation of the Renery. 24. The record of appeal reveals that the Renery moved the High Court for orders of judicial review, pursuant to Order 53 of the Civil Procedure Rules. In Dande & 3 others vs Inspector General, National Police Service & 5 others KESC 40 (KLR), the Supreme Court had the following to say on judicial review: “ 76. We note that judicial review was introduced to Kenya from England in 1956 through sections 8 and 9 of the Law Reform Act, cap 26. The jurisdiction to hear and determine judicial review was then vested in the High Court of Kenya. Under this system, the High Court could issue orders of mandamus, prohibition, and certiorari. The grounds for the issuance of such orders were borrowed from common law. 77. Prior to the promulgation of the Constitution in 2010 there were two legal foundations for the exercise of the judicial review jurisdiction by the Kenyan courts found in sections 8 and 9 of the Law Reform Act cap 26, which constituted the substantive basis for judicial review of administrative actions on the one hand, and, order 53 of the Civil Procedure Rules which was the procedural basis of judicial review of administrative actions, on the other hand. 78. However, the entrenchment of judicial review under the Constitution of Kenya 2010 elevated it to a substantive and justiciable right under the Constitution. Accordingly, judicial review is no longer a strict administrative law remedy but also a constitutional fundamental right enshrined in the Constitution. Thus, article 47 provides that 'every person has a right to an administrative action that is expeditious, ecient, lawful, reasonable and procedurally fair. ...................... https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 5

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85. It is clear from the above decisions that when a party approaches a court under the provisions of the Constitution then the court ought to carry out a merit review of the case. However, if a party les a suit under the provisions of order 53 of the Civil Procedure Rules and does not claim any violation of rights or even violation of the Constitution, then the court can only limit itself to the process and manner in which the decision complained of was reached or action taken and following our decision in SGS Kenya Ltd and not the merits of the decision per se.” 25. In its application for judicial review, under Order 53 of the Civil Procedure Rules, the Renery did not allege any violation of its constitutional rights. This means that in considering its application, in accordance with the afore sated Supreme Court decision, the High Court was obligated to consider only the procedural propriety of the decision of the Commissioner, and not to carry out a merit review. 26. The High Court’s judicial review jurisdiction did not extend to the correctness or otherwise, of the taxes or duty that the Renery was required to pay. It was limited to whether the Commissioner could decide to demand the tax payment from the Renery in the manner he did, given the instructions that the Commissioner had given 45 years ago, to his sta, copied to the Renery, in regard to the payment of taxes, for crude oil used by the Renery in its premises, for propelling its machinery for rening crude oil, and the subsequent conduct of the Commissioner in not demanding any taxes over the years. 27. In his judgment, the learned Judge in considering the application stated as follows: 28. “ 45. In this case the applicant’s case is hinged on two grounds. The rst ground is that based on the relevant law, the applicant is not under a legal duty to pay the taxes demanded by the respondent. This ground is based on the provisions of Section 51(1)(d)(i) of the East African Community Customs Management Act 2004, which specically provides that duty shall only be charged on goods produced from crude petroleum or partly rened petroleum oils delivered from the Renery for home consumption. 46. In order to determine this issue, the court would have to unravel what the phrase “delivered from the Renery for home consumption” means. With due respect, that is an issue that can only be properly resolved through an appeal either to the Tax Appeals Tribunal or the High Court. See Mombasa CA CA 154 of 2007: Pili Management Consultant Ltd-vs- Kenya Revenue Authority.” 46. The next issue for determination is whether legitimate expectation inured to the benet of the applicant herein. The learned Judge declined to consider the issue whether the applicant was under a legal duty to pay the taxes that were demanded by the Commissioner, as that issue was based on an interpretation of Section 51(1)(d)(ii) of the EACCM Act 2004, which issue was in his view, a matter for resolution by either the Tax Appeals Tribunal or the High Court on appeal. In this regard, the learned Judge cannot be faulted. The application before the Court was concerned with the decision-making process and not with the merits of the decision. That decision was for the Renery to pay the duty, taxes and penalties that were demanded as per the letter dated 31st January, 2012. The letter conveyed a decision regarding the payment of taxes that were payable, and if there was any dispute regarding whether the taxes were payable or the amount due, then the issue was not one for judicial review, but one to be canvased before the Appeals Tribunal or the High Court on appeal. Moreover, the Renery having opted to bring its https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 6

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application under Order 53 of the Civil Procedure Rules, without any reference to the Constitution, it left no room for the learned Judge to consider the substantive merit of the Commissioner’s decision. The learned Judge properly appreciated his jurisdiction and did not err in declining to make a nding on whether the crude oil used by the Renery in rening oil for marketers within its premises was taxable. 29. 30. In regard to the issue of legitimate expectation, the learned Judge considered several local decisions and decisions from other jurisdictions, as well as a publication on Administrative law on the issue, before concluding as follows: “ 62. In this case the manner in which the respondent sought to overlook its prior position as regards the applicant’s liability to pay taxes in the circumstances of this case was clearly unfair. The respondent ought to have given the applicant sucient notice of its intention to reverse its earlier position on the applicant’s liability to pay taxes where the fuel oil was consumed in the furnaces and boilers to produce heat and to run the applicant’s machinery so as to enable the applicant change its position. To fail to do so amounted to an arbitrary action on the part of the respondent in particular where the decision had retrospective operation. It ought to be remembered that the principle of legitimate expectation always involves notions of fairness. 63. It is therefore my view and I hold that the respondent’s decision violated the applicant’s legitimate expectation that it would not be subjected to taxation where the fuel oil was consumed in the furnaces and boilers to produce heat and to run the applicant’s machinery.” In appreciating legitimate expectation, the publication referred to by the learned Judge which was De Smith, Woolf & Jowell, Judicial Review of Administrative Action” 6th Edn. Sweet & Maxwell page 609, is important. This is what it states: “ A legitimate expectation arises where a person responsible for taking a decision has induced in someone a reasonable expectation that he will receive or retain a benet of advantage. It is a basic principle of fairness that legitimate expectations ought not to be thwarted. The protection of legitimate expectations is at the root of the constitutional principle of the rule of law, which requires predictability and certainty in government’s dealings with the public.” 31. In order to understand the conclusion that was made by the learned Judge, it is appropriate to reproduce the critical parts of two local decisions that the Judge referred to. The rst is a Court of Appeal decision in Republic vs Attorney General & Another Ex Parte Waswa & 2 Others [2005] 1 KLR 280 where the Court expounded: “ The principle of a legitimate expectation to a hearing should not be conned only to past advantage or benet but should be extended to a future promise or benet yet to be enjoyed. It is a principle, which should not be restricted because it has its roots in what is gradually becoming a universal but fundamental principle of law namely the rule of law with its oshoot principle of legal certainty. If the reason for the principle is for the challenged bodies or decision makers to demonstrate regularity, predictability and certainty in their dealings, this is, in turn enables the aected parties to plan their aairs, lives and businesses with some measure of regularity, predictability, certainty and condence. The principle has been very https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 7

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ably dened in public law in the last century but it is clear that it has its cousins in private law of honouring trusts and condences. It is a principle, which has its origins in nearly every continent. Trusts and condences must be honoured in public law and therefore the situations where the expectations shall be recognised and protected must of necessity defy restrictions in the years ahead. The strengths and weaknesses of the expectations must remain a central role for the public law courts to weigh and determine.” 32. The second local decision that the learned Judge referred to was a High Court decision Keroche Industries Limited vs Kenya Revenue Authority & 5 Others, Nairobi HCMA No. 743 of 2006 [2007] KLR 240, in which Nyamu, J. (as he then was) stated: “…legitimate expectation is based not only on ensuring that legitimate expectations by the parties are not thwarted, but on a higher public interest benecial to all including the respondents, which is, the value or the need of holding authorities to promises and practices they have made and acted on and by so doing upholding responsible public administration. This in turn enables people aected to plan their lives with a sense of certainty, trust, reasonableness and reasonable expectation. An abrupt change as was intended in this case, targeted at a particular company or industry is certainly abuse of power. Stated simply legitimate expectation arises for example where a member of the public as a result of a promise or other conduct expects that he will be treated in one way and the public body wishes to treat him or her in a dierent way…..Public authorities must be held to their practices and promises by the courts and the only exception is where a public authority has a sucient overriding interest to justify a departure from what has been previously promised. In order to ascertain whether or not the respondents decision and the intended action is an abuse of power the court has taken a fairly broad view of the major factors such as the abruptness, arbitrariness, oppressiveness and the quantum of the amount of tax imposed retrospectively and its potential to irretrievably ruin the applicant. All these are traits of abuse of power. Thus I hold that the frustration of the applicants’ legitimate expectation based on the application of tari amounts to abuse of power.” 33. The authorities cited provide an appropriate understanding of the application of the doctrine of legitimate expectation in Kenya. In addition, the Supreme Court has entrenched the local application of the doctrine of legitimate expectation. Two major decisions provide a good illustration. In Communications Commission of Kenya & 5 others vs Royal Media Services Limited & 5 others [2014] KESC 53 (KLR), the Supreme Court rendered itself as follows: “ (263) “Legitimate expectation” is a doctrine well recognized within the realm of administrative law, as is clear from the English case, In re Westminster City Council, [1986] AC 668 at 692(Lord Bridge): ‘…the courts have developed a relatively novel doctrine in public law that a duty of consultation may arise from a legitimate expectation of consultation aroused either by a promise or by an established practice of consultation’. 264. In proceedings for judicial review, legitimate expectation applies the principles of fairness and reasonableness, to the situation in which a person has an expectation, or interest in a public body retaining a long-standing practice, or keeping a promise. https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 8

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265. An instance of legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to full. A party that seeks to rely on the doctrine of legitimate expectation, has to show that it has locus standi to make a claim on the basis of legitimate expectation. 266. Wade and Forsyth in their work, Administrative Law, 10th ed (pages 446-448), discuss the relevant legal principles on legitimacy of an expectation. For an expectation to be legitimate, it must be founded upon a promise or practice by the public authority, that is said to be bound to full the expectation. ……. 267. The principle is well reected in judicial practice in Kenya. A relevant excerpt from Republic v. Nairobi City County & Another ex parte Wainaina Kigathi Mungai, High Court Judicial Review Misc. Case No. 356 of 2013; [2014] eKLR thus read (Paragraph 33): ‘…the legal position is that legitimate expectation cannot override the law. This was the position in Republic vs. Kenya Revenue Authority, ex parte Aberdare Freight Services Limited [2004] 2 eKLR 530 where it was held: ‘…a public authority may not vary the scope of its statutory powers and duties as a result of its own errors or the conduct of others. Judicial resort to estoppel in these circumstances may prejudice the interests of third parties. Purported authorisation, waiver, acquiescence and delay do not preclude a public body from reasserting its legal rights or powers against another party if it has no power to sanction the conduct in question or to endow that party with the legal right or inventory that he claims… Legitimate expectation is founded upon a basic principle of fairness that legitimate expectation ought not be thwarted – that in judging a case a judge should achieve justice, weigh the relative ‘strength of expectation’…’ 268. An illuminating consideration of the concept of “legitimate expectation” is found in the South African case, South African Veterinary Council v. Szymanski 2003(4) S.A. 42 (SCA) …………… 269. The emerging principles may be succinctly set out as follows: a. there must be an express, clear and unambiguous promise given by a public authority; b. the expectation itself must be reasonable; c. the representation must be one which it was competent and lawful for the decision-maker to make; and d. there cannot be a legitimate expectation against clear provisions of the law or the Constitution.” https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 9

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(Underlining added for emphasis) 34. In its more recent decision in Kenya Revenue Authority vs Export Trading Company Limited (Petition 20 of 2020) [2022] KESC 31 (KLR) the Supreme Court stated: “ 50. In the 4th Edition, Vol 1 (1) At page 151, paragraph 81 of the Halsbury’s Laws of England, legitimate expectation is described as follows: ‘A person may have a legitimate expectation of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by authority, including an implied representation, or from consistent past practice.’ 51. Further according to De Smith Woolf & Jowell, “Judicial Review of Administrative Action” 6th Edn Sweet & Maxwell page 609; ‘A legitimate expectation arises where a person responsible for taking a decision has induced in someone a reasonable expectation that he will receive or retain a benet of advantage.’ 52. As can be discerned from these two denitions, legitimate expectation may take many forms. It may take the form of an expectation to succeed in a request placed before the decision maker or it may take the objective form that a party may legitimately expect that, before a decision that may be prejudicial is taken, one shall be accorded a hearing. 53. Respectfully, we take the view that the question of whether a legitimate expectation arose is more than a factual question. It is not merely conned to whether an expectation exists in the mind of an aggrieved party, but whether viewed objectively, such expectation is in a legal sense, legitimate. 54. This is the position taken by this court in the CCK Case where it was held that legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulll. For an expectation to be legitimate therefore, it must be founded upon a promise or practice by a public authority that is expected to fulll the expectation. We then went on to nd the emerging principles on legitimate expectation to be that; ‘a. there must be an express, clear and unambiguous promise given by a public authority; b. the expectation itself must be reasonable; c. the representation must be one which it was competent and lawful for the decision-maker to make; and d. there cannot be a legitimate expectation against clear provisions of the law or the Constitution.’ https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 10

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55. We also note that in the English case of Council of Civil Service Unions and others v Minister for the Civil Service [1983] UKHL6; [1984] 3 All ER 935, it was held by the House of Lords, inter alia that: ‘An aggrieved person was entitled to invoke judicial review if he showed that a decision of a public authority aected him by depriving of some benet or advantage which in the past he had been permitted to continue to enjoy and which he could legitimately expect to be permitted to continue to enjoy either until he was given reasons for its withdrawal and the opportunity to comment on those reasons or because he had received an assurance that it would not be withdrawn before he had given the opportunity of making representations against the withdrawal.’ ” 35. The exposition of the law in the afore cited authorities, reveals that where a person has enjoyed a benet or advantage pursuant to representations made by a public authority, either expressly or by conduct or practice; and has been made to believe that he would continue enjoying the benet or advantage, and the person who has made the representation has the authority to make such representation, he has a legitimate expectation that he will continue to enjoy the benet or advantage, and it would be unreasonable and unfair to take away without consultation or giving the person a hearing. 36. At paragraph 1 of the undisputed instructions given by the Commissioner to his sta in 1965, and copied to the Renery, it is indicated that the instructions deal “with reneries where imported oils are distilled, “cracked” or rened,” and a renery is dened as “a bonded warehouse licensed by the Commissioner for the treatment of oils.” It is not disputed that the Renery was a bonded warehouse and that the instructions were copied to it. 37. At paragraph 15(a) of the instructions, it is provided that oil may be used duty free in the renery “for rening, chemical process, production of solids or gases, consumption for making heat, light, power, testing in the renery laboratory, lubricating or propelling machinery…” In light of this paragraph and the subsequent practice by the Commissioner, of not collecting any duty on the crude oil that was used by the Renery in its furnaces and boilers, to run its machinery in producing rened oil, a legitimate expectation inured in the Renery that the Commissioner had exercised his discretion in accordance with paragraph 15(a) of the instructions, and that the Renery would not be required to pay any duty on the crude oil used in its premises which was a bonded warehouse. 38. The fact that the practice of the Renery not paying duty on the crude oil, continued for a period of over 45 years, conrms the Renery’s expectation, and rendered the unilateral decision to demand duty, including duty backdated, made by the Commissioner through letters dated 5th December 2011 and 31st January 2012, arbitrary, unfair and unreasonable. We appreciate that a change in law making the payment of duty on crude oil used in a renery bonded warehouse, mandatory, could have aected the legitimacy of the Renery’s expectation. However, although the Commissioner claimed the law had changed, no such change was demonstrated to the learned Judge. The attempt to rely on Article 210 of the Constitution could not assist the Commissioner, as that constitutional provision does not outlaw any waiver or variation of taxes, but allows the same to be done in accordance with legislation. Since it was the appellant who was asserting that there had been a change rendering such waiver illegal, it was upon him to prove the same, which he failed to do. 39. The upshot of the above is that the learned Judge properly exercised his discretion, in applying the doctrine of legitimate expectation in favour of the Renery, and issuing the orders of judicial review https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 11

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against the Commissioner. The appeal is accordingly dismissed. We also uphold the reasons given by the learned Judge on costs, and therefore order each party to bear their own costs in this appeal. It is so ordered DATED AND DELIVERED AT NAIROBI THIS 20TH DAY OF DECEMBER, 2024. HANNAH OKWENGU .................................. JUDGE OF APPEAL ALI-ARONI .................................. JUDGE OF APPEAL J. MATIVO .................................. JUDGE OF APPEAL I certify that this is a true copy of the original. Signed DEPUTY REGISTRAR https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1937/eng@2024-12-20 12

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