Blow to Keroche as KRA Wins Case to Collect Sh9bn From Brewer

The Kenya Revenue Authority (KRA) is set to collect taxes amounting to Kshs 9,116,835,985 from Keroche
Breweries Limited with regard to products manufactured and marketed by the Naivasha based brewer.

This follows a win by the taxman in the six appeals filed by Keroche before the Tax Appeals Tribunal in 2015 and 2017 respectively.

In three of the appeals, the contention was the manufacturing process of Vienna Ice Vodka.

The brewer argued that the Vienna Ice was not a distinct product from Crescent Vodka since Vienna Vodka was produced by diluting Crescent Vodka which process did not amount to manufacture.

KRA relied on the Compounding of Denatured Spirits Act Cap 123 and argued that the process undertaken by Keroche Breweries was compounding within the meaning of the Act.

In the other three appeals, the contention was with regard to the classification of pineapple based wines.

The brewer had argued that what they produced was fortified wines which should be classified under HS
Code 22.04 which attracted a lower excise duty rate of 40%. Their position was that the classification was specific for any fortified wine.

KRA’s position was that HS code 22.04 was reserved for wines based on grapes and the Keroche’s fortified wine was purely fermented pineapple as such is to be classified under HS Code 22.06 which is for any other
fermented beverage.

HS code 22.06 attracted a higher excise duty rate of 60%.

The Tax Appeals Tribunal in its’ judgments delivered on March, 9 2020 held that Keroche Breweries was involved in the compounding of spirit which amounts to manufacture within the meaning in Excise
Duty Act, 2015 and Customs and Excise Act, CAP 472 (repealed)as such Vienna Ice was a distinct product for which Excise Duty was payable.

With regard to Fortified wines produced by the brewer, the Tribunal guided by the World Customs Organization explanatory notes on HS code found that HS code 22.04 was for grape-based wines and the
correct classification was HS code 22.06 as the Keroche’s wine is a mixture of fermented pineapple and alcohol.

The Tribunal, however, faulted the Authority for levying interest and late payment penalties for the period the disputes were being litigated at the High Court and the Court of Appeal which had directed that the matters be heard at the Tax Appeals Tribunal.

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