Lessons from Premier Foods Limited v Commissioner of Legal Services & Board Coordination (Tax Appeal No. E634 of 2026) [2026] KETAT 493 (KLR)
Introduction
A duty remission is not a benefit that belongs to a business or a family of companies. It belongs to the one manufacturer named in the Gazette.
The Tribunal dismissed the appeal and upheld the Commissioner’s Review Decision of 21st April 2026, leaving import duty and VAT of KShs. 180,880,976.00 due and payable. Sugar imported by a subsidiary under a remission gazetted to its parent did not qualify, however faithfully it was used.
What Happened
By a Business Transfer Agreement dated 31st December 2020, Premier Food Industries Limited (PFIL) transferred its food manufacturing business to its wholly owned subsidiary, Premier Foods Limited. On 6th July 2022 the EAC Council gazetted a remission of import duty on 4,000 metric tonnes of industrial sugar, allocated to PFIL. Between August and December 2022, three consignments were entered in the name of Premier Foods. After a post clearance audit, the Commissioner demanded import duty of KShs. 135,210,032.00 and VAT of KShs. 45,670,944.00 by a Notice of Demand of 25th February 2026, and upheld it on review.
The Commissioner’s argument was simple. The remission was granted to PFIL. Premier Foods is a separate legal entity from the gazetted importer, so its imports were ineligible, and it should have sought approval in its own name after the restructuring. No legitimate expectation can arise against clear provisions of the law.
The company’s answer was that PFIL and itself are one economic enterprise under common ownership. The sugar was used only in approved manufacturing, nothing was diverted, there was no revenue loss, and the name mismatch was a procedural oversight caused by the overlap between the EAC fiscal cycle and its own financial year.
What the Tribunal Decided and Why
The remission was conferred on a named manufacturer, and on no other
Under Section 140(3) of the EACCMA, the manufacturer and the approved quantity are fixed by publication in the Gazette. The 2022 grant named PFIL, and Premier Foods appeared nowhere in it. Since Salomon v Salomon, common ownership does not fuse a holding company and its subsidiary into one person, and entitlement must exist in favour of the person who enters the goods.
The timing mismatch did not survive the company’s own documents
The Gazette Notice was valid for twelve months under Regulation 6(1) of the Duty Remission Regulations. Every procurement and entry date fell within that window. The restructuring had taken place some eighteen months earlier, and the company was later gazetted in its own name for 2023 to 2025, proving it knew the procedure.
Substance over form cannot supply a gazettement the Council never made
Citing Commissioner of Domestic Taxes v Unga Limited, the Tribunal held there is no room for a purposive approach where a taxing statute is clear. Here form and substance coincided: the importer truly was not the gazetted manufacturer. Only the Council can name a beneficiary, and where the condition of a remission fails, the uncollected duty is by definition the revenue loss.
Section 135 was properly invoked, within five years
Whether duty was short levied is the very question Section 135 answers; it cannot be assumed away. The earliest entry was on 19th August 2022 and the demand issued on 25th February 2026, well within the five-year limit. That officers passed the entries at clearance did not bar correction, and the VAT followed the duty.
A fine is not a substitute for duty
Section 209(1) of the EACCMA, with its USD 5,000 general penalty, punishes offences; Section 135 recovers revenue. No offence had been charged, and substituting a fine for duty would grant through the penal provisions the very remission reserved to the Council. The appeal was dismissed, and each party bore its own costs.
Key Take-Homes for Stakeholders
- To you Companies & Groups undergoing restructuring
When a business moves between group companies, every licence, approval and remission tied to the old entity must move with it, and promptly. Here the transfer preceded the gazettement by about eighteen months, and that gap cost the group KShs. 180.9 million. Notifying the Commissioner of the transfer is not the same as being gazetted.
- To you Manufacturers under the EAC Duty Remission Scheme
Check that the importer of record on every entry matches, letter for letter, the manufacturer named in the Legal Notice, and that the quantities and validity period line up. Faithful use of the inputs will not cure a mismatch of identity, and an absence of diversion is not a defence.
- To you Customs, finance and compliance teams
Clearance at the border is not the end of exposure. The Commissioner may audit and demand short levied duty for up to five years, together with the consequential VAT. Reconcile remission allocations against entries each cycle so that any mismatch is caught and regularised before the next audit, not after it.
- To you Taxpayers relying on economic substance
Substance over form helps where a legal form disguises a different reality. It does not help where the form is accurate and a statutory condition simply has not been met. Nor will a proportionality or legitimate expectation argument succeed against a clear provision of the law.
- To you Advocates and tax agents
Producing documents is not the same as discharging the burden. The Tribunal accepted that Premier Foods furnished its records, yet held that the burden under Section 30 of the Tax Appeals Tribunal Act is one of persuasion. Develop every ground pleaded, as the ground under Regulation 107(4) was treated as abandoned, and build the case on the statute rather than on fairness alone.
Disclaimer: This post is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in this article should be assumed without seeking specific legal advice on the subject matter. If you have any query regarding the same, please do not hesitate to contact our Tax Law and Consulting Department; TaxLaw@wamaeallen.com .
About the author
Caxstone specializes in civil, employment and labour disputes, constitutional law, family law and succession, and environment and land matters. He has amassed a wealth of knowledge and experience in litigation which is evident in the successes obtained for clients. He is an active member of the Employment and Labour Relations Court Bar-Bench committee.
Denis Mutugi specializes in Commercial Litigation and Alternative Dispute Resolution.
Denis graduated with a Bachelor of Laws, LLB (Hons) from The University of Nairobi in 2021 and was admitted to the Roll of Advocates of the High Court of Kenya in the year 2023.
Denis has amassed a considerable wealth of experience in conducting legal research on various complex legal matters touching on Commercial, Insurance, Employment and Insolvency law and bankruptcy.
