Court upholds decision to charge sugar importer 2.5 billion in import duty, here is how it happened

On the 12th of May 2017, Treasury Cabinet Secretary (CS) Henry Rotich through a Gazette notice exempted sugar imported between 12 May and 31 August 2017 form customs duty. The reason for the exemption was to counter the effects of a drought as affirmed by a presidential declaration the same year.

As a result, Darasa Investments Ltd bought 40,000 tonnes of brown sugar from Brazil, and the consignment was loaded onto a vessel known as the Anangel Sun on 15th July 2017 for transportation to Kenya. The consignment was set for arrival in Kenya on the 28th of August, 2017 which was still within the exemption period. However, due to rough seas and the vessel being too big to berth at the port of Mombasa, the consignment arrived late.

Unable to unload at the Mombasa port, the Anangel Sun had to continue on its journey to Jebel Ali port in Dubai where the sugar consignment was loaded into another ship and transhipped back to Kenya.  Darasa Ltd wrote to the Cabinet Secretary Ministry of Agriculture, Livestock and Fisheries asking for an extension of the exemption period to allow for its consignment to be cleared duty free.

Moreover, 13 other companies who had sought to import sugar within the exemption period had also failed to get their sugar into the country on time. The Agriculture Cabinet Secretary wrote to his Treasury counterpart requesting for an extension of the exemption period.

In response, the Treasury Cabinet Secretary amended the previous  notice in a new Gazette notice dated 4th October 2017, where all sugar consignments loaded into a vessel destined for a port in Kenya (a substitution for ‘sugar imported’ as stated in the previous Gazette notice ) within the exemption period (12 May-31 August 2017) would be exempted from duty.

From Dubai, Darasa Ltd’s sugar consignment arrived in Mombasa aboard a vessel, known as MV Iron Lady between 28-30th October 2017, but the company’s agent was not allowed to clear it under the conditions of the exemption notice. The reason stated was that there were inconsistencies relating to the date of loading, place of inspection, certificate of origin and change of ownership of the consignment.

Darasa Ltd took the matter to court under High Court Judge Ogola, asking for the decision not to clear its sugar consignment free of duty be quashed. The said decision had been communicated to Darasha via a letter dated 22nd November detailing that the consignment wouldn’t be exempted from duty under the gazetted notice and thus Darasa had to pay a sh2.5 billion import duty.

In the case, the key issues under the judge’s determination were whether the consignment was loaded for shipping between 12 May-31 August 2017, whether Darasa’s consignment was entitled to duty exemption, whether the decision to deny Darasa Ltd import duty exemption was unfair and unreasonable and whether Darasa Ltd should have instead taken the matter to the tax appeal tribunal as provided under Section 229 (1) & (2) of the East African Community Customs Union and Section (2) & (12) of the Tax Appeals Act, 2013.

On hearing the case, Judge Ogola quashed the decision to charge Darasa Ltd sh2.5 billion as tax duty for failure to meet conditions of the tax exemptions as stipulated in the Gazette notice. Additionally, the judge issued an order prohibiting the case respondents (Kenya Revenue Authority (KRA), Commissioner of Customs Services and Mr. Julius Musyoki) from charging Darasa Ltd any duty above the sh4.1 million already been paid as import declaration fees and maritime fee levy. The judge also ordered the respondents to release the sugar consignment on duty free basis.


Aggrieved by the ruling the respondents appealed the High Court’s ruling at the Court of Appeal on seven grounds including faulting the High Court judge for:

  • Finding that the court had jurisdiction to rule on the matter despite the fact that Darasa Ltd had not exhausted the available alternative remedies for the dispute (i.e the tax appeal tribunal).
  • Finding that the aggrieved parties/appellants had not given reasons for their decision not to exempt the sugar consignment of duty in the letter dated 22nd November 2017.
  • Shifting the burden of proof to the appellants.
  • Finding that Darasa was subjected to discrimination.
  • Finding that the appellant’s decision was unreasonable.
  • Finding that the Darasa Ltd was entitled to exemption of duty on account of legitimate expectation.

Appellant’s argument

The appellants through their lawyers Ms. Otachi and Ms. Ontweka,   argued that the High Court’s authority to review the administrative matter at hand, was unlawfully invoked because Darasa Ltd had not exhausted all the alternative means for addressing the dispute. Arguing that although objection to the authority of the court on a matter should be raised in the early stages of a case, it can still be raised at any stage of the proceedings-even in appeal owing to its importance to the case.

On the issue of alternative remedies to the matter at hand, the appellant’s lawyers cited the following cases: Kenya Revenue Authority vs. Keroche Industries Ltd. – Civil Appeal No 2 of 2008 (unreported), Grain Bulk Handlers Ltd. vs. Kenva Revenue Authorities [2018] eKLR and Cortec Mining Kenya Limited vs. Cabinet Secretary Ministry of Mining [2017].

In which the decisions were that where parliament had provided alternative legal ways of addressing disputes; the aggrieved party must exhaust the available means for resolving the dispute before seeking the court’s review as a last resort.

Additionally, exemptions were only to be made in cases where facts weren’t disputed and only as a matter of dissatisfaction over the manner in which a public body had performed its administrative function.

The appellants’ lawyers argued that Darasa Ltd’s matter didn’t qualify under such exemptions and if even if they did, they hadn’t made a formal application to be exempted from taking up the alternative dispute remedies as required by law.

Additionally, the lawyers argued that Judge Ogola had disregarded inconsistencies in the documentary evidence provided by Darasa Ltd. For instance where a pre-export verification certificate produced by Darasa Ltd showed that the Brazilian brown sugar was produced in August 2017 and September 2017, despite Darasa Ltd stating inconsistently that the sugar was loaded for shipping on 15th July, 2017-before production.

The lawyers argued that this and other identified inconsistencies, brought into question whether the sugar had been loaded within the duty exemption period.

On the matter of failing to provide reasons for the their decisions not to exempt Darasa Ltd’s consignment of duty, the appellants argued that through their 22nd November letter to Darasa Ltd, they had stated reasons including inconsistencies relating to the date of loading, date and place of inspection, certificate of origin and change of ownership. Additionally, they had further explained their reasons through corresponding communication that were dispatched before the above-mentioned letter.

The appellants took issue with Judge Ogola’s decision that the exemption gazette notices gave Darasa Ltd legitimate expectations that their consignment would be cleared duty-free despite not meeting the conditions for waiving of the duty. Furthermore, the appellants argued that there was no evidence to show that they had discriminated Darasa Ltd in respect to the other 13 importers who had been cleared; because their documents didn’t bear the same inconsistencies.

Darasa Ltd’s argument

On the other hand, Darasa Ltd’s lawyers Mr Ngatia teaming up with Mr. Musota, argued that Article 47 Section (3) (a) of the constitution, provides legislation for the court to review an administrative action (such as the tax dispute at hand) in addition to-if appropriate, an independent and impartial tribunal.

As such the lawyers argued that the complaint by Darasa Ltd could only be litigated in the High Court as the alternative tribunal-the Tax Appeals Tribunal had no power to resolve a public law dispute.

Additionally, the lawyers cited the case of Municipal Council of Mombasa vs. Republic & another [2002] eKLR where it was stated that review of an administrative action by court is concerned with the decision-making process, not with merits of the decision itself.

The lawyers raised an issue with whether the decision makers (KRA, Commissioner of Customs Service and Mr. Mutiso) had the jurisdiction to do to make the decision, whether persons affected by the decision were heard before it was made and whether in making the decision, the makers took into account relevant vs irrelevant matters.

Thus, the lawyer’s contention was that the appellants were at fault for denying Darasa Ltd a hearing, and for taking irrelevant matters (document inconsistencies) into consideration; thereby arriving at a flawed decision that harmed their client.

Additionally, they contended that the existence of an alternative remedy (a tax tribunal in this case) by itself was not grounds for declining a judicial review, especially considering the appellants participated in and took long to raise objection to the court’s jurisdiction, quoting Judge Nyarangi in The Owners of the Motor Vehicle “Lillian S” vs. Caltex Oil Kenya Ltd [1989] KLR:

“A question of jurisdiction ought to be raised at the earliest opportunity, and the court seized of the matter is then obliged to decide the issue right away on the material before it. Jurisdiction is everything. Without it, a court has no power to make one more step. A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

Court of Appeal ruling

Court delivers judgment image from

The Court of Appeal ruled on the case on the following fronts:

  1. Did the learned Judge have jurisdiction to entertain the judicial review proceedings? and if so,
  2. Was the appellants’ decision contained in the letter dated 22nd November 2017, open to judicial review as sought by the respondent?
  3. Did the learned Judge properly exercise his discretion in issuing the orders he did?

The judgment of the Court of Appeal was that High Court Judge Ogola had errored in finding that by virtue of participating in the judicial review process, the appellants had consented to the court’s jurisdiction.

The court cited a case, Adero & Another vs. Ulinzi Sacco Society Limited [2002] 1 KLR 577 whose judgment was summarised as; a court’s jurisdiction could not be convened by the agreement of parties concerned. The jurisdiction of a court either exists or does not exist and its existence could not be presumed in any way from the actions of the parties.

Additionally, jurisdiction was such an important matter that it could be raised at any stage of the proceedings even on appeal.

The Court of Appeal determined that the High Court or any subordinate court by its own motion could exempt a party from having to pursue the alternative remedies ( the tax appeal tribunal) and instead seek judicial review.

As a result, the court determined that the conditions under which Judge Ogola exempted Darasa Ltd fell within the scope of judicial review and were rightful because it addressed the appellants (KRA, Commissioner of Customs Services and Mr. Julius Musyoki) decision-making process rather than whether their decision was right or wrong.

However, the Court of Appeal found that Darasa Ltd’s contention that it wasn’t given an opportunity to be heard held no water, as it was given an opportunity to clarify the inconsistencies in its documents in a letter from the appellants dated 20th November, which Darasa Ltd responded to a day later. The court also found that reasons for the refusal of exemptions were adequately given.

Furthermore the court found that the appellant did not, in fact, consider irrelevant matters (inconsistent documents) in its decision as alleged by Darasa Ltd’s lawyers; because the documents claimed to be inconsistent e.g. bill of lading-which acts as a receipt of goods by the shipowner, were relevant to establishing whether the consignment was shipped within the required timeline.

However, since these documents with a focus on the date which the sugar consignment was loaded for shipping, are disputed facts that are still unresolved, the Court of Appeal found Judge Ogola to be in error when he ordered the duty free clearing of the sugar consignment.

This order, the appellate court deemed went outside the jurisdiction of Judge Ogola, because it was replacing the legal mandate of the Commissioner of Customs Service to clear goods with its own opinion that Darasa Ltd’s sugar consignment qualified for the duty exemption conditions of the Gazette notice.

The Court of Appeal found that as it was, the Commissioner for Customs Services had established that Darasa Ltd had not provided clear evidence of the time of loading of its consignment, thus, there was no legitimate expectation that Darasa’s consignment would be cleared duty free.

Finally, the court determined that Judge Ogola was also in error of holding the appellants’ decision to charge duty on Darasa Ltd’s sugar consignment; as unreasonable, unlawful and procedurally deficient. Since there was no evidence to show inconsistencies in the documents of the 13 other companies that were allowed to import their sugar duty free, there was no proof to indicate discrimination against Darasa Ltd.

Based on the above-mentioned information, the Judges of the Court of Appeal, Alnashir Visram, W. Karanje and M.K Koome  allowed the appeal, setting aside the orders of the High Court in its 22nd February 2018 ruling and substituting them with orders dismissing Darasa Ltd’s application.


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