Miller gets reprieve on Sh800m tax

The High Court has stopped the taxman from demanding over Sh800 million in tax arrears from United Millers Ltd until a petition filed by the company is heard and determined.

Justice Isaac Lenaola issued the interim orders Monday restraining the Kenya Revenue Authority or its agents from enforcing the collection of Sh831,140,476 from the company pending determination of the case.

“Having read the petition and the affidavit in support of the petition I am satisfied that giving the interim orders will preserve the status of the company and therefore grant prayer 3,” Mr Lenaola said.

United Millers manufactures various products including maize flour, wheat flour, cooking oil, bar soaps and animal feeds.

The company filed an urgent suit on Wednesday last week claiming that KRA was in the process of issuing agency notices to reclaim the disputed tax despite filing their returns showing they don’t owe KRA any tax arrears.

Through lawyer Boniface Munyao, the company said they had paid the taxes for the period between January 2008 and May 2013 and that KRA’s demand violated the East Africa Community Customs Management Act.

“KRA demand is based on allegations of non-declarations, under-valuation and non-export of products yet the company has fully demonstrated that it imports were declared under the correct tariff headings and that the correct values were declared based on commercial invoices,” said Munyao.

He said KRA demand is also against the law on customs and tariff declaration on export of goods since value added tax on exported goods has been zero-rated.

The company adds that the demand for taxes flouts the EAC Customs Act and is against the provisions of the law on tax collection.

“It is unfortunate for KRA to demand the extra taxes, interest and penalties when we have also filed another appeal at the Customs and Excise Appeals Tribunal over the illegal move likely to interfere with the company management,” said Munyao.

Mr Munyao said the contention dates back to January 2008 when the company imported various goods for use in its processes to manufacture products for export and for sale locally.

“At the time of the importations, the company paid the applicable taxes in accordance with the law and dealt with the goods in a manner consistent with the law,” Munyao said.

KRA conducted an audit of the company’s operations and has demanded extra taxes totalling Sh1.4 billion.

However when the company raised objections the figure was reduced to Sh831 million.

The lawyer says the move was illegal since all the company transactions, including their exports, were done under the supervision and endorsement of KRA officers.

Justice Lenaola directed KRA to respond to the suit before the inter-parties hearing on December 20.