KENYA – The High Court has found consumer goods manufacturer Proctor and Allan guilty of evading Sh5 million tax by altering the ingredients of a supplement it imported in 2008 on behalf of the World Food Programme (WFP).
The consumer goods manufacturer moved to court last year to block the claim, arguing that the supplements were ingredients it was to use in the processing of a product for the WFP after winning a supply tender in 2008.
Lady Justice Jacqueline Kamau has thrown out a petition by Proctor and Allan, which was seeking to block the tax claim, as she agreed with the taxman’s argument that the alteration of the vitamin premix’s ingredients was sufficient ground to put it in a different tax bracket.
The taxman charged the tax on Proctor and Allan after it discovered that the premix had a high concentration of carbohydrates, prompting it to shift the consignment to another tax bracket.
The consumer goods manufacturer had told the court that the carbohydrates were a transporting agent, hence the taxman erred in claiming the Sh5 million from it.
Proctor and Allan in its pleadings claimed that the taxman was wrong in concentrating on the carbohydrates composition of the premix, which was at 70 per cent as per the test results produced in court.
“Proctor and Allan did not provide sufficient proof to this court to demonstrate that the carbohydrates in the sample were merely a transporting agent as it had alleged,” added the judge.
KRA made the claim after carrying out an audit of Proctor and Allan’s books between 2004 and 2009, accusing the company of misclassification of the product.
The dispute was first settled by the KRA’s disputes tribunal in 2009, to which Proctor and Allan protested in several correspondences with the taxman through to 2013 when the consumer goods manufacturer moved to court to fight the claim.
Proctor and Allan’s suit was based on the differences with the taxman over the classification of the supplements after a test was done on its contents, and the alleged refusal of the disputes tribunal to grant it an appeal of its earlier decision in favour of the tax claimants.
“The court finds that Proctor and Allan did not succeed in any of the grounds set out in the memorandum of appeal. The said tribunal arrived at a conclusion that was legally sound and within the law. The court sees no reason to interfere with the same,” the judge said in her verdict.
The judge also agreed with the tribunal’s decision to decline Proctor and Allan’s request for appeal in 2012, as it was not filed within the 30 days provided for by law.
The company had filed the request for appeal through an agent, UHY Kenya, which wrote to the tribunal in June 2011.
“Indeed, the latest the appellant should have filed its application for review was September 22, 2010. Evidently, the appellant’s letter and that of its agent were outside the mandatory 30 days,” added the judge.