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Court orders Keroche to pay KRA Sh500 million

A judge Monday directed Keroche Breweries to pay the Kenya Revenue Authority Sh500 million as a condition to stop the taxman from recovering Sh9.1 billion from the Naivasha- based brewer.

Justice David Majanja said if the brewer fails to pay the amount in 30 days, an order stopping KRA from recovering the amount, by attaching Keroche’s accounts, would lapse.

Keroche on Friday secured an order barring KRA from seizing its bank accounts and protection from forcible transfer of cash from the lenders to the taxman. Justice Majanja declined KRA’s bid to overturn the Friday order, arguing the move would ground Keroche Brewer—which manufacturers the Summit Lager and Summit Malt beers.

“I have considered all the factors and I find that the appellant (Keroche) is a going concern and the action by the respondent may cripple its operations.

However, the taxes have been outstanding for long. In the circumstances, I make the following orders,” the judge said.
He said whereas Keroche was entitled to the right of appeal, KRA on its part should enjoy the fruits of the judgment, which it obtained last week.

KRA had filed a fresh application urging the court to lift the order, which stopped the agency from recovering the money.

Mr Francis Muirui, a KRA official, said in a sworn statement that the demand for Keroche to pay the amount was not a fresh assessment. He said the company was all aware of the tax liability since the case was pending before the tax appeal tribunal.

In the absence of any order

And after the Tax appeal tribunal delivered its judgment on March 9, KRA was free to recover the taxes, in the absence of any order.

Last Friday, Justice Majanja suspended the enforcement of any collections arising from the decision of the tax appeal tribunal and directed the parties to appear before him on Monday morning for directions.

Yesterday, Justice Majanja directed the Tribunal to furnish Keroche Breweries with typed proceedings and copies of the judgement delivered last week, to enable the brewer to challenge taxes payable for its ready to drink Viena Ice Vodka.

The firm’s CEO Tabitha Karanja said in court documents that while the latest claim by the KRA is for Sh9.1 billion, the taxman has in the last few months made several demands for a cumulative payment of Sh23 billion from the company.

At the heart of Keroche’s latest troubles is one of its most popular products, Viena Ice Vodka, which the KRA wants to be taken off the list of fortified wine products.

Fortified wines are alcoholic drinks that have a distilled spirit added to them. The taxman argues that the fortified wine products list is reserved for grape-based drinks, while Vienna Ice is made from fermented pineapples.

But Ms Karanja said Viena Ice is simply a diluted version of Crescent Vodka, another of the brewer’s products, with water hence the process cannot be equated to manufacture.

When KRA demanded Sh1.1 billion from Keroche in 2006, the taxman backdated taxes on Viena Ice by five years, but the brewer went to court. The Court of Appeal eventually ordered KRA to issue a reasonable notice with supporting documents.

The taxman then issued demands for excise duty (Sh467,704,167), VAT (Sh388,594,657) and corporate and withholding tax (737,333,959).

It is these demands totalling Sh1.5 billion that Keroche has been battling at the Tax Appeals Tribunal and which KRA says has grown to Sh9.1 billion.

The case will be heard on April 23.