The High Court has extended orders barring the Kenya Revenue Authority (KRA) from accessing Keroche Breweries bank accounts to collect Ksh9 billion tax.
The authority had requested the court to overturn the stay order that was issued on Friday by Justice David Majanja.
Keroche Breweries had moved to court after the taxman froze its accounts at Equity Bank and Absa Bank, following a ruling by the Tax Appeals Tribunal (TAT) that allowed the taxman to recover the monies in taxes from the brewer.
Keroche Breweries through its lawyers Hamilton Harrison and Mathews argued that KRA’s agency notice on its bankers was tantamount to collapsing the brewery.
While rejecting KRA’s request on Monday, Justice Majanja also dismissed the authority’s bid to have Keroche Breweries provide security for its KShs 9 billion demand.
“The court observed that KRA’s demand could destroy the brewer’s business yet the company is exercising its right to appeal against the two decisions by the Tax Appeals Tribunal, ” said Keroche in a statement.
Instead of KRA’s request for Ksh9 billion security, the court ordered Keroche Breweries to pay Ksh500 million within a period of 30 days.
Keroche Breweries had also accused the tax tribunal of failing to serve its lawyers with the March 9, 2020, ruling that allowed KRA to collect the Ksh9 billion in taxes.
The brewer argued that a copy of the ruling will help the company exercise its right to appeal.
The judge ordered that the tribunal releases the judgement within 48 hours and all proceedings within 7 days.
The ruling comes days after Keroche Breweries CEO Tabitha Karanja accused KRA of abuse of power.
She stated that KRA’s notice to freeze its accounts was illegal as the brewer has a right to appeal TAT’s ruling within a period of 30 days.
“As a law-abiding company, we expected that KRA would abide by the process in which we had 30 days by law to appeal the VAT the TAT decision. We are shocked that KRA has no intention of respecting the legal process, ” Ms Karanja said.
“The statement issued yesterday [Wednesday, March 11) was a public gimmick to mislead and influence the public to support a KRA operation to stop Keroche Breweries from operating.”
Ms Karanja added that she will fight to the bitter end.
“This is absolute misuse of power that we the people have bestowed on KRA. They have lied to the public that we owe them Ksh9 billion. They know very well; the legal process in the matter has just began. Immediately the Tax Appeals Tribunal made a decision, we have 30 days to appeal. The Tribunal made its decision 2 days ago, Monday 9th March 2020, ” she said.
Out of the six cases dismissed by TAT, three appeals were related to Viena Ice Vodka, while the three others on the pineapple-based wines.
Keroche announced its dissatisfaction with the Tribunal’s decision, saying that it would head to the High Court.
In the case, KRA was demanding taxes for the Vienna Ice Brand of Vodka, which Keroche argued that was not manufactured, but made by diluting the Crescent Vodka.
KRA argued that the process amounted to compounding of denatured spirits, which is taxable.
“The decision is retrogressive, anti-entrepreneurship and stifles much-needed innovations without which the cause of Kenyan industrialization is hurt. This means that all water added to our vodka to make a ready to drink vodka and consumed to date -backdated for last eight years – now attracts Ksh243.00 per litre. The decision to tax the water added to our vodka at the above rate makes this the most expensive water in the world,” added the statement.
The battle between Keroche Breweries and KRA has been on since 2014, with KRA accepting that there was confusion in the taxation rate seven years later.
The company claims that it has been paying taxes for the Crescent Vodka, which is what is in the 500ml Viena Ice Ready-to-Drink Vodka.
In August last year, Ms Karanja and her husband Joseph Karanja were arrested in Naivasha after the brewer was accused of Ksh14 billion tax evasion. The duo was charged with tax evasion and later released on Ksh 10 million and Ksh2 million bail respectively.