The entrance to Mumias Sugar Company.
The Tax Appeals Tribunal has allowed the Kenya Revenue Authority (KRA) to collect Sh3.5 billion in unpaid taxes from the troubled Mumias Sugar adding to the financial woes of the miller.
This is after the miller's receiver manager failed to give evidence challenging the tax assessed, which the KRA raised after the caretaker manager failed to pay various tax heads and file the miller's annual tax returns. The assessment is for the period between 2013 and 2023.
"Guided by the foregoing analysis, authorities, Section 56 (1) of the TPA (Tax Procedures Act) and Section 30 of the TAT (Tax Appeal Tribunal) Act, the tribunal thus finds and determines that Appellant failed in discharging its burden of proof that the Respondent’s assessments were not justified," said the five-bench tribunal.
Mumias Sugar's current receiver manager moved to the tribunal in February last year to appeal a tax assessment that covered various tax heads including corporate income tax, pay-as-you-earn (PAYE), excise duty, value-added tax, withholding tax and back taxes.
The receiver manager PVR Rao was also opposed to the decision by the KRA to penalise them for failure to file annual tax returns arguing that the i-Tax system could not accept returns without filing returns for the earlier periods. The receiver manager said they could not file the returns because the former management declined to hand over pre-receivership records.
However, the tribunal found that the receiver manager refused to provide evidence to back up these claims.
Five days after PVR Rao was appointed the new receiver manager of Mumias Sugar in September 25, 2019, he wrote to the KRA informing the taxman that its debt would get paid in accordance with the law. The KRA wrote back on September 30, 2019 informing the receiver manager of a tax arrears of Sh10,351,890,277.00 for 2013 - 2019.
On August 22, 2023, the KRA wrote to the receiver managers on its intention to conduct an audit. A month later, the taxman issued an assessment notice demanding Sh16,177,566,678.00 in tax arrears.
The receiver manager objected to this assessment on November 30, 2023, which the KRA objected to on January 23, 2024, even as it reduced the assessment to Sh3,510,517,137.
Read: Shocker as KRA refuses to waive Sh36 billion tax arrears owed by sugar millers, cites Finance Act
Dissatisfied with the decision, the new receiver manager, Gadhoke, moved to the tribunal on February 21, 2024, and filed a notice of appeal on the next day.
KRA argued that because the receiver manager continued to do business ever since it took over, earning an income while dealing with taxable services and excisable goods, it had to pay taxes.
"The respondent averred that the appellant having been appointed as a receiver manager for the company was liable to account for all debts and liabilities of the company accrued before and after its appointment," said the tribunal, which was chaired by Robert Mutuma Mugambi
The taxman also noted that it raised the tax demand after it noticed that there were variances on the sugar miller's turnover captured on Income Tax and that of Value Added Tax. The other reason for the assessment, the KRA said, was the failure of the receiver manager to file its annual returns for the tax heads to which it ought to have filled.
The Kenya Commercial Bank (KCB) placed Mumias Sugar under receivership in September 2019 for non-payment of debts amounting to 20 billion. It then appointed Rao as the administrator to help resuscitate the miller which shut down in 2017 due to financial distress.
In December 2021, Uganda-based conglomerate Sarrai Group was awarded a lease to run Mumias Sugar but the same was suspended by the High Court and revoked in April 2022. Sarrai appealed the decision to the Court of Appeal and was allowed to lease the assets of the miller for a period of 20 years.
dakure@ke.nationmedia.com
