The Kenya Revenue Authority (KRA) faced a defeat in a long-standing tax dispute amounting to Ksh1.38 billion against Bidco Oil Refineries.
High Court Judge JWW Mong’are, in a recent ruling, concluded that KRA’s tax demand against Bidco was unwarranted due to errors in its calculations and a misapplication of customs valuation regulations.
As seen in a report by the Business Daily, the case was first mentioned in court in 2010 when KRA demanded Ksh702 million from Bidco, subsequently issuing agency notices to five banks holding accounts for Bidco and four supermarkets that stocked Bidco’s products.
Bidco swiftly challenged the claim before the Customs and Excise Appeals Tribunal, which ultimately ruled in favor of Bidco on December 18, 2020.
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However, KRA appealed this decision in May 2021, arguing that the tribunal had made legal and factual errors. Nevertheless, the recent High Court ruling upheld the tribunal’s finding that the customs value of the goods should be based on the actual purchase price, rather than the insured value, which had been inflated by 10 percent, as is common in the industry.
The court also dismissed KRA’s argument that Bidco lacked an insurable interest in the imported goods, affirming that once payment was made, Bidco had a legitimate insurable interest.
The judgment reinforces the established practice in the export business, where ownership of goods typically changes at the port of importation.
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The High Court’s decision has granted Bidco Oil Refineries a significant reprieve in this lengthy tax dispute, and the case against them has been dismissed with costs awarded to Bidco.
