Having been facing charges of gross misconduct that sought to kick her out of office, Deputy Chief Justice Philomena Mwilu once again finds herself squarely thrust in the middle of a major case involving the loss of half-a-billion shillings.
In the puzzling case, the Kenya Revenue Authority made an error that caused them to lose 500m in terms of taxes, and a five-member Supreme Court bench led by Mwilu tossed aside the tax body’s appeal.
A rice importer had gotten away with Sh500 million unpaid tax after the Kenya Revenue Authority failed to calibrate their systems to distinguish countries of origin.
Export Trading Company ltd paid a preferential tax rate of 35 per cent on imported rice instead of 75 per cent due to a technical error by the taxman, by failing to distinguish imports from Pakistan, which enjoyed the lower rate compared to other countries.
The Supreme Court dismissed KRA’s bid to claim the back taxes faulting the taxman for failing to calibrate the Simba system, in its automated tax collection and import clearance system, to differentiate between countries of origin.
A bench of five judges of the Supreme Court said it is incomprehensible how the taxpayer should be made to suffer the consequences of the actions of the taxman of failing to input the correct rate in a system it had full control over.
The KRA wanted to recover Sh378 million from the rice importer plus penalties and interest amounting to Sh138 million for rice it imported from Burma, Vietnam and Thailand between 2007 and 2009.
“We reiterate the findings by the High Court and Court of Appeal and hold that the appellant acted unfairly in demanding for the alleged short levied duty almost 4 years after the initial assessment and payment of the duty so assessed were irrational and did not accord the respondent its right to fair administrative action,” the judges led by Deputy Chief Justice Philomena Mwilu said.
The judges said the rice importer had a legitimate expectation after KRA failed to collect duty at the applicable rate, having applied the rate of 35 percent in its Tradex Simba system.
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