Business mogul Narendra Raval fights Treasury over Sh4 billion KRA tax dispute

President William Ruto receives a gift from The Executive Chairman, Devki Group of Companies Dr Narendra Raval's family after commissioning Cemtech Limited Clinker Plant in Sebit, West Pokot County on April 08, 2024. [PCS] An industrialist is gearing up for a fight with the government over changes to the payment plan in a Sh4 billion tax deal for his two companies. This comes after the Kenya Revenue Authority (KRA) sought the tax from the businessman, following Treasury Cabinet Secretary John Mbadi's refusal to use taxpayers' money to settle the payment. The move by KRA to seek payment from the two companies owned by Narendra Raval has sparked a vicious court battle. Mbadi, in his letter dated October 2, 2024, now before the High Court, informed Devki Steel Mills Ltd and Cemtech Ltd Group Commercial Director Lokesh Kumar that it would be illegal to pay the taxes for the two firms from government coffers. The CS revoked the promise made by the former Jubilee administration to Raval that his companies would be exempt from paying Value Added Tax on machinery and a clinker plant in West Pokot in 2015, as well as on the Devki machinery and plant in 2020. "We have taken note of the matter and wish to state that the letters written by the National Treasury and Economic Planning are not supported by any tax law or other legislation," Mbadi said. "Considering there is no legal provision supporting the undertaking, the letters Ref: DFN 415/402/039 dated December 17, 2020, and Ref: DFN 415/402/039 dated June 29, 2020, from the National Treasury to Cemtech Ltd and Devki Steel Mills Ltd, respectively, are hereby withdrawn," he added. ALSO READ: Ruto appoints billionaire Narendra Raval to oversee Government Press reforms Following Mbadi's letter, KRA demanded Sh1.6 billion from Devki, including Sh1.3 billion in principal taxes and a five per cent penalty estimated at Sh69 million. KRA calculated the gross duty to be Sh1.4 billion, with Sh152 million in interest for late payment. It also sought Sh2.4 billion from Cemtech, with Cemtech owing Sh2.1 billion in principal taxes, of which Sh105 million was to be paid as a five per cent penalty. The gross duty amounted to Sh2.2 billion, with late payment interest of Sh199 million. "Since the National Treasury has not honoured the undertaking, you are required to settle the outstanding liability. ''Please take note that the primary responsibility for tax payment lies with the taxpayer, as per Section 133 of the East African Community Customs Management Act 2004," KRA stated. Following KRA's demand, Devki and Cemtech filed separate cases seeking to force Mbadi to pay the taxes as had been promised earlier. In the cases filed before Justice Florence Wangari, the two companies claimed that the Treasury had clearly committed to the exemption. According to their lawyer, Griffins Timbe, the clinker plant and steel factory are critical for the country's economic growth. Timbe argued that the amount demanded was so substantial that Cemtech and Devki would be forced to close if it were recovered. He further claimed there was no justification for KRA to demand the payment four years after the exemption was granted. Devki and Cemtech sued the Treasury CS, KRA, and the Attorney General. The court heard that the two companies had already used the exempted items and released goods to the market. They accused the government of discrimination, claiming that many other entities had also been granted tax exemptions. "As evidenced from the many correspondences referred to herein, the plaintiff has tried everything within its means to settle this matter amicably, but the defendants have refused, making the filing of this application necessary," said Timbe. When President William Ruto and his predecessor Uhuru Kenyatta were re-elected for their second terms, they promised to implement the Big Four Agenda: affordable housing, universal healthcare, industrialisation, and food security. Raval's companies claimed that the then government amended the first schedule of the Value Added Tax law to allow VAT exemptions on plant and machinery used to manufacture goods. Jonathan Mbau, Cemtech's import coordinator, swore an affidavit in support of the case. He claimed that when Raval started building the clinker plant in 2018, the government waived taxes on machinery and plants purchased from outside Kenya in the 2019 Finance Act. ALSO READ: Devki boss Narendra Raval: How Kenya can shed the tag of a net importer However, the government reintroduced a 14 per cent VAT on imported machines from April 25, 2020. Mbau further claimed that after Covid-19 swept through the country, Cemtech wrote to the Treasury seeking exemptions to mitigate the effects of the pandemic. "The letter also stated that the VAT exemption was necessitated by a lack of cash flow due to the economic recession resulting from the Covid-19 pandemic and that the clinker plant was, and still is, a strategic investment that would spur economic growth," claimed Mbau. He alleged that KRA had written to the firm informing it that the government had undertaken to pay VAT on the plant and machinery. Mbau said that importation and clearing were done in lots between December 28, 2020, and December 2022. The manager argued that it was unfair for the Treasury to revoke the exemption. "In a complete twist of events and in total breach of its own approval for exemption and written undertaking, the first defendant has, by a letter dated October 2, 2024, purportedly withdrawn its undertaking dated December 17, 2020, because there were no legal provisions supporting the undertaking and that the plaintiff should pay the tax being demanded by the second defendant," he said.

Business mogul Narendra Raval fights Treasury over Sh4 billion KRA tax dispute

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Business mogul Narendra Raval fights Treasury over Sh4 billion KRA tax dispute

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