Court clears KRA's e-stamp duty deal with Swiss firm

Court of Appeal judges say the taxman did not break any law when it awarded the tender to SICPA Securities Ltd. [iStockphoto]

The Court of Appeal has cleared the Kenya Revenue Authority's (KRA) multi-million shillings contract with a Swiss firm for the provision of new-generation excise stamps on soft drinks and cosmetics.

Appellate Court judges Hellen Omondi, Daniel Musinga and Grace Ngenye ruled that KRA did not break any law when it awarded the tender to SICPA Securities Ltd and overturned a High Court decision that had declared the contract as illegal.

"It is our considered view that KRA acted lawfully in awarding the contract to SICPA Securities Ltd. The High Court made a mistake by finding that other companies were locked out of the tender and that there was no public participation in awarding the contract," ruled the judges.

The dispute started when the Treasury Cabinet Secretary announced new regulations that bottled water, juices, soda and other non-alcoholic beverages and cosmetics, manufactured or imported into Kenya, shall be affixed with the new generation excise stamps.

KRA then awarded the contract to affix new generation excise stamps on the listed goods to SICPA Securities Ltd at an initial cost of Sh17 million. However, Busia Senator Okiya Omtatah challenged the contract, arguing that it was irregularly awarded through direct procurement.

The High Court allowed his petition and quashed KRA's decision to award the contract to SICPA Securities Ltd on the basis that there was no public participation and that it failed to follow the Public Procurement and Disposal Act regulations.

KRA and the company through Senior Counsel Paul Muite appealed the decision, arguing that the High Court failed to consider evidence that proved the contract followed due process.

The appellate judges agreed with Muite's submissions, ruling that since there was an already existing contract between KRA and the company, the easiest thing was to re-issue the tender and award it directly to the Swiss firm.

"The company was already laying the works in the pipeline. As per the Auditor General's report, it would have cost the consumer much more if a parallel system was to be put in place. It is on account of this that we find the tender was not awarded irregularly," ruled the judges.

On public participation, the Appellate Court ruled that the Kenya Association of Manufacturers with representation across the country presented their views which were factored by the Treasury before coming up with the new regulations.

They added that a consultative meeting in every county was not necessary so that the Excisable Goods Management Systems (EGMS) could pass the public participation test since a reasonable and real opportunity was given to the public with timely access to information.

According to the judges, the High Court also applied the wrong law in determining that the contract was illegal and that KRA did not abuse its powers by awarding the contract to SICPA Securities Ltd.

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