KRA wins Sh517million tax dispute against Mastermind

KRA wins tax dispute with Mastermind Tobacco

In Summary

•The decision by the Tribunal followed an appeal filed by Mastermind Tobacco (K) Limited in 2016 against a decision by KRA to demand taxes


The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

The Kenya Revenue Authority (KRA) can proceed to collect  Sh517,755,155 in tax from Mastermind Tobacco (K) Limited,  the Tax Appeals Tribunal has ruled.

In a judgement delivered on April 23, the tribunal held that Mastermind failed to discharge its burden of proof that it actually exported the cigarette consignment in question.

The Tribunal's decision followed Mastermind's appeal in 2016 against a decision by KRA demanding the taxes.

“The Respondent’s Objection Decision confirming the assessment and demand for taxes in the sum of Sh517,755,155.00 is hereby upheld", ruled the tribunal.

The tribunal heard that on November 26, 2016 police officers on an operation recovered firearms stolen from the Booker police station and impounded 419 cartons of SuperMatch cigarettes for export at a suspect’s residence.

KRA was notified and took over the investigations to establish whether the cigarettes declared for export by the company were duly exported and not dumped in the local market.

A sample was taken and provided to Mastermind  for conformation and authentication.

On December 2, 2016, Mastermind forwarded a report to KRA’s investigation team indicating that the sample provided did not match the quality standards and physical characteristics of the products by the company.

Subsequently, KRA issued Mastermind with a notice requiring it to avail documents and information relating to their export consignments.

KRA followed up with a reminder asking Mastermind to  comply with its previous notice and avail the export documents.

Following Mastermind's failure to comply, KRA stopped further import entries  by the appellant in June of 2017.

KRA assessed Mastermind to pay VAT of Sh90,225,155 and Excise Duty of Sh427,500,000 on account of sales of cigarettes that were classified as exports and hence zero rated but the taxpayer failed to provide proof of exports for the consignments. 

Mastermind objected to the findings by KRA and KRA gave an Objection Decision on May 22, 2018. 

Aggrieved by the decision, Mastermind appealed to the Tax Appeals Tribunal.

The Tribunal, however, noted that exportation of goods is a process which required Mastermind to produce evidence of documents acquired and presented at every stage of the process; from the country of origin, to the transit state and finally at the country of destination. 

In upholding KRA’s decision to assess taxes for lack of proof of exportation, the Tribunal found that KRA is empowered to request for the production of all the documents used at every stage of the export process. 

The Tribunal further found that the KRA’s request for the production of export documents was neither unreasonable, unfair nor a violation of Mastermind's  rights.