It is a sweet victory for the taxman in the battle to collect Sh517 million from Mastermind Tobacco.
This is after the Tax Appeals Tribunal allowed the Kenya Revenue Authority (KRA) to collect the tax following a decision in an appeal filed by Mastermind Tobacco.
In March 2018, KRA assessed Mastermind Tobacco to Value Added Tax (VAT) of Sh90.2 million, and Excise Duty of Sh427.5 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.
Mastermind Tobacco objected to the findings by KRA and the taxman gave an objection decision on May 22, 2018.
Aggrieved by the decision of the Commissioner to confirm the assessment, Mastermind Tobacco appealed to the Tax Appeals Tribunal.
The tribunal affirmed KRA's position on the assessment in its judgment delivered on April 23, 2021.
In arriving at its finding, the Tribunal held that Mastermind Tobacco failed to discharge its burden of proof that it actually exported the cigarette consignment in question.
Exportation of goods
The Tribunal noted that exportation of goods is a process that required Mastermind Tobacco 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 under the EACCMA regime to request for the production of all the documents used at every stage of the export process.
The Tribunal further found that the KRA's request for the production of export documents was neither unreasonable, unfair nor a violation of Mastermind Tobacco's rights under Article 47 of the Constitution of Kenya, 2010.
"KRA shall now proceed to collect the outstanding taxes from Mastermind Tobacco (K) Limited," KRA said in a statement.