A court has directed the Kenya Revenue Authority (KRA) to allow the reopening of a distillery being investigated for allegedly affixing fake excise stamps on one of its alcohol products.
Justice James Makau restrained KRA from continuing to lock and seal Algarve Distillers Ltd’s manufacturing facility and equipment or deny or limit owners’ access to it.
He also ordered KRA to release to Algarve excise stamps that were approved and paid for. The orders will remain in force pending the determination of the distiller’s case challenging the closure of its plant last month.
Algarve was also directed to allow KRA investigators to proceed with their work and, if need be, supervise the production and affixing of excise stamps on its beverages.
Judge Makau found that KRA officials entered the plant and locked it without reasonable and justifiable cause.
“The closure of the premises has definitely caused the company to suffer financial loss, notwithstanding it had legitimate expectation that administrative action by the KRA were to be fair and practicable,” he said.
Through Isaac Gachoka, KRA said that its data shows that excise tax has been performing poorly despite high compliance levels in the market.
To establish the reason for the poor performance, he said, the KRA enforcement team embarked on audits of excise stamps affixed on excisable products.
The costing analysis of a 20-bottle carton of 250 millilitres each affixed with genuine excise stamps indicated the minimum retail price cannot be below Sh2,800.
Mr Gachoka said KRA established that duplicate excise stamps were behind the low retail price of various alcoholic beverages bearing “genuine” excise stamps.
Duplication of stamps
So as to protect revenue and curb duplication of stamps, KRA said, it was imperative that investigations into Algarve’s conduct be completed and stamps paid for be retained as the plant had been closed to allow the agency to conclude its inquiry.
But Justice Makau declined the request, noting that KRA had failed to demonstrate what prejudice it would suffer if orders were granted to reopen the plant.
The distillery was shut down after KRA alleged that its Piston products were affixed with duplicate or counterfeit excise stamps. The products were allegedly seized from non-named third parties.
“It is noted that at the material time no goods were found with duplicated or counterfeited excise stamps at the company’s premises by the KRA’s officials,” the judge said.
“KRA in their replying affidavit did not depone nor allege that duplication and the counterfeited excise stamps were found in the company’s premises nor were any product seized from their warehouse with duplicate or counterfeit excise stamp,”
The company’s representative, Peter Ndiritu, told the court that it has been making alcoholic beverages since 2019.
He said KRA had approved and received payments for excise stamps, and withholding the stamps and shutting down the plant without explaining why was unlawful and unreasonable.
When KRA was challenged to explain its drastic action, he said, the agency served Algarve with a letter dated July 22, 2021 alleging that its Piston product had been affixed with duplicate or counterfeit excise stamps.