KRA, sugar importer settle multi-billion tax dispute out of court

The protracted battle between the Kenya Revenue Authority (KRA) and Darasa Ltd, a sugar importer is finally drawing to a close after the taxman agreed to release the 40, 000 metric tonnes of sugar (800,000 bags) imported from Brazil by the former in an out of court settlement.

KRA had from January blocked Darasa from offloading the sugar aboard the MV Iron Lady Ship at the Port of Mombasa over Ksh2.5 Billion in excise duty and VAT arrears owed to it by the former.

The agreement will be guided by a consent signed by KRA and Darasa lawyers, ensuring that Darasa Investment Ltd clears its dues.

“Darasa Investment Ltd is bound by the consent to first of all seek clearance from relevant government agencies including the Kenya Bureau of Standards (KEBS), Ports Health, the Agriculture and Food Authority (AFA) and the Radiation Protection Board before further engagements with KRA,” reads a statement to newsrooms by KRA.

The clearance will be conducted to ensure that the sugar is fit for human consumption, before customs allow the consignment into the country.

Darasa will further be required to settle Ksh547, 846, 969 in ninety days if waiver of interest and penalties is not granted as per the East African Community Customs Management Act.

If the waiver is not granted within the 90 days, the money will be paid to KRA.

Upon completion of the due payments, KRA will release the consignment.

The out of Court settlement brings to an end the prolonged court battles between KRA and Darasa.

At the time the sugar was being impounded, Darasa claimed that it imported the consignment during the controversial duty free period gazzeted by Treasury Cabinet Secretary Henry Rotich that saw a number of unscruplous traders import poisonous sugar into the country.

KRA however insisted that duty was payable on the sugar since it didn’t fall under the Duty free window.

Aggrieved by KRA’s decision, Darasa moved to the High Court to seek legal redress.

High Court judge Erick Ogola ruled that KRA had discriminated against Darasa by allowing other companies to clear their sugar but still went ahead to impound the plaintiff’s sugar.

KRA appealed the decision and won. The Court of Appeal sitting in Mombasa ordered Darasa Ltd to pay the Ksh2.5 billion.

Darasa would later get one over the taxman after the Supreme Court stopped it from demanding tax or seizing the Brazilian sugar pending an appeal filed at the apex court.

The settlement comes at a time when KRA is trying to reduce the number of cases it is currently facing at the courts through Alternative Dispute Resolution (ADR).

ADR is legally provided for in Article 159 (2)(c) of the Constitution as well as in other tax legislations.