The High Court on 31st January 2022 in the case of Commissioner of Domestic Taxes (KRA) V W.E.C Lines Kenya [Case No. HCCOMMITA E084/2020] invalidated the VAT Regulations 2017 for reason that they were not tabled before the National Assembly.
The Kenya Revenue Authority however filed a Notice of Appeal and an application for review of the judgement in the High Court seeking a review of the judgement delivered by the High Court on 31st January 2022 invalidating the VAT Regulations 2017 and a review of the High Court judgement that the taxpayer – W.E.C Lines Kenya – having made zero-rated supplies, was entitled to VAT refunds due to the invalidation of the Regulations.
Proceedings of the review application.
KRA outlined the procedure that was followed towards the enactment of the Regulations, citing that the Regulations were tabled before the National Assembly on 10th May 2017, released to the public through a press release, letters were issued and the Regulations were published in the Kenya Gazette. In its argument, KRA implored the Court to review its judgement which if allowed to prevail, would lead to the loss of revenue in form of tax refunds requested by taxpayers.
W.E.C Lines Kenya opposed the application on grounds that the information upon which KRA based its review application was not new information as required under Section 80 of the Civil Procedure Act and Rule 15 of the Tax Appeals Tribunal Act (Appeals to the High Court) Rules of 2015. It further argued that the Tribunal had found that even if the Regulations were valid, they could not take precedence over the VAT Ac 2013.
Holding of the Court.
In determining the review application on 14th July 2022, the Court relied on the holding of the Court of Appeal in Multichoice Kenya Ltd v Mwananchi Group (Kenya) Ltd & 2 Others (2020) eKLR in holding that it had the jurisdiction to hear the review application since KRA had only filed a Notice of Appeal and not a substantive appeal.
The Court further allowed the review application on the main reason that it was in the public interest, even though it was grounded on evidence already known to KRA contrary to Order 45 of the Civil Procedure Rules. It, therefore, reviewed its judgement only to the extent that the VAT Regulations 2017 are invalid for failure to be tabled before the National Assembly. It however dismissed KRA’s request to review its finding that the taxpayer was entitled to refunds due to the invalidation of the Regulations.
What is the effect of this decision?
The judgement by the High Court has the effects of:
- Settling the dispute of application for review where a Notice of Appeal has been filed.
The High Court in its holding stated that a review application can be determined by the Court where only a Notice of Appeal has been filed and not the substantive appeal.
- Reinstating the VAT Regulations 2017.
The High Court reviewed its judgement and therefore found that the VAT Regulations 2017 were tabled before the National Assembly and were thus valid. Nevertheless, all matters arising from the applicability of these Regulations would be settled on a case-by-case basis and determined on merit.