Mastermind made to pay Sh0.5b levy
Bernice Mbugua @BerniceMuhindi
Tax Appeal Tribunal has upheld the decision by Kenya Revenue Authority (KRA) to demand Sh517 million in taxes from local cigarette manufacturer Mastermind Tobacco.
This after the Mahat Somane led tribunal dismissed an appeal filed by the manufacturer owned by the late billionaire Wilfred Murungi’s family, saying the firm failed to discharge its burden of proof on cigarette consignments.
“The respondent’s objection decision confirming the assessment and demand for taxes in the sum of Sh517,755,155.00 is hereby upheld,” ruled the tribunal.
Mastermind Tobacco had filed the appeal in 2016 against a decision by KRA to demand the said taxes.
Indeed, before he died, Murungi was concerned of an impending sale of his properties to settle a Sh2.9 billion tax claim demanded by the Kenya Revenue Authority.
Dispose property
Mr Murungi’s Mastermind Tobacco, the makers of Supermatch brand, had been asked to file a consent in court indicating the firm was willing to dispose off 12 properties in order to raise Sh1.54 billion, as partial payment of one of the tax claims.
The case follows a police operation on November 26, 2016 where officers recovered fire arms stolen from the Booker police station and impounded 419 cartons of super match cigarettes meant for export at a suspect’s residence.
KRA then took over the investigations with the objective of establishing whether the cigarettes entered for export by Mastermind were duly exported and not dumped in the local market.
A sample of the cigarettes recovered was taken and provided to Mastermind tobacco for conformation and authentication of the product.
On December 2, 2016, Mastermind tobacco told KRA that the sample provided did not match the quality standards and physical characteristics of the products by the company.
By a letter dated March 26, 2018, KRA assessed Mastermind Tobacco (K) Limited for value added tax (VAT) of Sh90 million and Excise Duty of Sh427 million on account of sales of cigarettes that were classified as exports and hence zero rated but the taxpayer failed to provide proof of exports for the consignments.
Aggrieved by the decision of the Commissioner to confirm the assessment, Mastermind Tobacco (K) Limited appealed to the Tax Appeals Tribunal.
The Tribunal, however, noted that exportation of goods is a process which required Mastermind Tobacco (K) Limited to produce evidence of documents acquired and presented at every stage of the process; from the country of origin, to the transit state and finally at the country of destination.
In upholding KRA’s decision to assess taxes for lack of proof of exportation, the Tribunal found that KRA is empowered to request for the production of all the documents used at every stage of the export process.
“We note in the first instance the Appellant herein is either deliberately being oblivious or genuinely does not understand that the export from one country to the other within the East African Community is governed by the East African Community Custom Management Act 2004,” ruled the tribunal.
According to the Tribunal, KRA’s request for the production of export documents was neither unreasonable, unfair nor a violation of Mastermind Tobacco Ltd rights under Article 47 of the Constitution.
