A titanic legal battle in which a sugar importer is asking to be allowed to bring in 40,000 tonnes of sugar duty free is heading back to the courts in Mombasa on Monday.
The case, in which the Kenya Revenue Authority is seeking to collect Sh2.6 billion in taxes, has already been through the hands of two High Court judges.
The dispute arises from the decision mid-last year — at the height of the drought and maize flour crisis — to allow the duty free importation of maize, milk as well as sugar to alleviate shortages.
Sugar traders were allowed to bring in the commodity free, provided it was loaded in the country of origin not later than July 30. The period was later extended, by gazette notice, to August 31.
Darasa Investment Ltd, from which the KRA is demanding Sh2,548,542,325, is accusing the taxman of being unfair in refusing to allow it to offload and put in the market its consignment.
However, in the papers filed in court in previous suits, KRA argues that Darasa did not meet the conditions for tax exemption. Basing his argument on the documents filed by Darasa, the taxman has raised doubts about the origin of the sugar, the date when it was loaded, the date and place where it was inspected as well as its ownership.
Treasury Cabinet Secretary Henry Rotich had granted the one-month extension following a request by his Agriculture counterpart, Mr Willy Bett, intervening on behalf of 14 companies that failed to meet the earlier deadline, apparently because of “logistical difficulties, low tides delaying loading of cargoes, turbulent and unfavourable weather in the high seas and delays in transshipment ports”.
In a November 20, 2017, letter, the KRA commissioner in charge of Customs and Border Control Julius Musyoki points to the contradictions of the applicant’s documents which he said appeared to suggest that the sugar was loaded before being produced.
He also points out that the paper trail shows the owners of the sugar as a Ugandan company and not Darasa.
“The reason for the delay in the clearance of the sugar consignment was entirely caused by the failure by the importer/owner to provide information to address the discrepancies addressed by customs,” wrote Mr Kariuki Githigi for the deputy commissioner in charge of Compliance, Policy and Programmes at the KRA in a letter dated December 20, 2017. Mr Gichigi cites a number of discrepancies.
“The bill of lading indicated the date of loading as July 15, 2017, from Santos Port, Brazil, on board vessel Anangel .
The shipper as per the quoted BL is Angolgest Consoltoria Gestion, SL Madrid, in Spain, on behalf of Sabrina Engineering Company Ltd, Kampala, Uganda. However, another copy of the BL marked as “draft” shows the shipper as Lumira General Trading for Multi Commerce FZC, Sharjah, issued in Dubai without indicating the date of issue. (It is) just xx/xx/xx,” writes Mr Gichigi.
He further says the importer failed to satisfactorily justify the three months delay between July 15 and October 30, 2017, the date of arrival of the sugar.
KRA also questions the movement of the consignment from Brazil to Dubai and to Mombasa and is not satisfied with the applicant’s explanation that the initial vessel MV Anangel Sun could not dock in Mombasa because of its size and unfavourable weather conditions, necessitating a rerouting to Dubai and the transfer of sugar there to the MV Iron Lady .
Subsequently, on November 21, KRA wrote to Darasa Investments Ltd declining to grant the tax exemption and asking the company to pay taxes amounting to Sh2,548,542,325 “to facilitate further processing and clearance of the consignment.”
Darasa on December 18 sued KRA and obtained orders from Justice Eric Ogola of the Mombasa High Court compelling the taxman to allow the offloading of the consignment to the warehouse of the applicant’s choice.
KRA then challenged the order before Justice Mugure Thande who allowed KRA’s initial order to have the sugar detained at the Mombasa Port precincts, pending the resolution of the matter. She directed that the sugar be kept in port sheds.
While opposing the request to transfer the sugar to a warehouse outside the port, KRA cited revenue risks. It argued that the warehouse preferred by Darasa is not a customs bonded warehouse and there was risk of the cargo being released.
In its counter-argument, Darasa said no port shed is big enough to hold the entire consignment, the sugar would have to be spread all over the port, compromising its security.
The sheds are also in a bad state and the sugar could be rained on. The case will be heard with all parties present Monday.
