• KRA's Commissioner Paul Matuku said that the authority and the breweries had a contention with regard to classification of pineapple based wines.
• In August last year, the brewer went to court for alleged tax evasion poked holes in the case being fronted by the Director of Public Prosecution (DPP), where the company allegedly owe KRA Sh14.4 billion.
Image: FILE
The Kenya Revenue Authority can now proceed to collect taxes of Sh9.1 billion from Keroche Breweries Limited with regard to products manufactured and marketed by the liquor company.
This follows a big win by KRA in the six appeals filed by Keroche before the Tax Appeals Tribunal in 2015 and 2017.
In three of the appeals, KRA and Keroche disagreed on the manufacturing process of Vienna Ice Brand of Vodka.
The brewer argued that the Vienna Ice brand of Vodka was not a distinct product from Crescent Vodka since Vienna Vodka was produced by diluting Crescent Vodka which process did not amount to manufacture.
KRA, on the other hand, argued that the process undertaken by Keroche Breweries was compounding within the Compounding of Denatured Spirits Act Cap 123.
Compounding of spirits also amounted to the manufacture of a new product within the definition of the Customs & Excise Act, CAP 472 (now repealed).
KRA's Commissioner for Legal Services and Board Coordination Paul Matuku said in a statement on Wednesday that the authority and the breweries had a contention with regard to classification of pineapple based wines.
"The Brewer had argued that what they produced was fortified wines which should be classified under HS Code 22.04 which attracted a lower excise duty rate of 40%. Their position was that the classification was specific for any fortified wine," he said.
KRA’s position was that HS code 22.04 was reserved for wines based on grapes and the Keroche’s fortified wine was purely fermented pineapple as such is to be classified under HS Code 22.06 which is for any other fermented beverage.
"The HS code 22.06 attracted a higher excise duty rate of 60%," Mutuku said.
The Tax Appeals Tribunal in its ruling on March 9, held that:6.1. Keroche Breweries Limited was involved in the compounding of spirit which amounts to manufacture within the meaning in Excise Duty Act, 2015 and Customs and Excise Act, CAP 472 (repealed) as such Vienna Ice was a distinct product for which Excise Duty was payable.
"With regard to Fortified wines produced by the Brewer, the Tribunal guided by the World Customs Organization explanatory notes on HScode found that HS code 22.04 was for grape-based wines and the correct classification was HS code 22.06 as the Keroche’s wine is a mixture of fermented pineapple and alcohol," Mutuku said.
The Tribunal, however, faulted KRA for levying interest and late payment penalties for the period the disputes were being sorted at the High Court and the Court of Appeal.
Keroche Breweries has continuously locked horns with the taxman in different disputes with regard to a series of tax and licensing stand-offs with authorities for almost 16 years now.
In August last year, the brewer went to court for alleged tax evasion poked holes in the case being fronted by the Director of Public Prosecution (DPP), where the company allegedly owe KRA Sh14.4 billion.
According to Keroche, “the much-publicized” figures did not add up based on the firm's turnover.
Keroche argued that for the last 13 years, it has been one of Kenya's largest taxpayers and in the last five years (January 2015 to June 2019), its total turnover of Sh18.5 billion yielded a tax remittance of Sh7.2 billion.
“Basically, 40 per cent of what Keroche produces goes to the government as tax,” Keroche CEO Tabitha Karanja said.