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Court of AppealPartially AllowedCivil Appeal 95 of 2004

Kenya Revenue Authority v Rajendra Ratilal Sanghani [2006] KECA 173 (KLR)

Court of Appeal of Kenya
14 July 2006
ROR. S. C. OmoloPWP. N. WakiWDW. S. Deverell
2,502 words in judgment
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The bottom line

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The Court of Appeal ruled KRA must return seized goods if it misses legal deadlines, but owners still owe any unpaid import duty.

What this practically means

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Executive summary

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The Court of Appeal at Nairobi (Omolo, Waki and Deverell JJA) allowed in part an appeal by the Kenya Revenue Authority against orders of Lenaola J issued in judicial review proceedings. The respondent had bought a Mercedes Benz 500 SEL from Philip Moi in 1994; in 2001 customs officials seized it as suspected uncustomed goods. After the respondent wrote claiming ownership, the Commissioner neither instituted condemnation proceedings nor required the claimant to do so within the statutory two months, yet moved to dispose of the vehicle. The High Court quashed the disposal decision, ordered unconditional release, and barred the KRA from ever demanding duties, penalties or charges. The Court of Appeal affirmed the quashing, holding that failure to follow sections 200 and 202(2) of the Customs and Excise Act precluded deprivation of the vehicle. However, it held the High Court erred in holding that the Commissioner could no longer recover unpaid duty: under section 202(4)(b) release is subject to payment of any applicable duty. The Court accordingly deleted the words 'forthwith unconditionally' from the mandamus and set aside the prohibition order. It also set aside the mandamus directed at the non-existent 'Commissioner of Motor Vehicles'. As both parties succeeded to some extent, there was no order as to the costs of the appeal and each party was to bear its own costs in the High Court. The judgment binds subordinate courts and the High Court on the statutory seizure-and-claim procedure and on the recoverability of duty upon release.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the High Court was right to quash the KRA's decision of 14 April 2003 to dispose of the seized vehicle
  2. 2.Whether an order of mandamus could issue compelling unconditional release of the vehicle where duty had not been paid
  3. 3.Whether the order of prohibition restraining the Commissioner from ever demanding or collecting customs duties, penalties, interest and charges was sustainable
  4. 4.Whether the mandamus against the 'Commissioner of Motor Vehicles' to issue a log book had any practical effect

Key legal issues

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01

Compliance with the seizure and claim procedure under sections 200 and 202 of the Customs and Excise Act

Holding

The failure to follow the statutory procedure precluded the Commissioner from depriving the claimant of the vehicle; the order of certiorari quashing the disposal decision was correctly granted

Reasoning

After the respondent gave written notice of claim on 4 June 2001, the Commissioner had only two statutory options: institute condemnation proceedings himself, or require the claimant to do so within two months. He did neither, so section 202(2) mandated release. The Court of Appeal held the High Court's reasoning on this point could not be faulted in law.

p. 4
02

Recoverability of unpaid customs duty on release of a seized vehicle

Holding

The Commissioner retains the right to recover unpaid duty; release is subject to payment of applicable duty under section 202(4)(b), so the mandamus could not be 'unconditional' and the prohibition order could not stand

Reasoning

Section 202(4)(b) expressly provides that a thing seized and not condemned shall be released to the owner subject to payment of any applicable duty. The High Court's order making release unconditional and barring future demand for duties contradicted this provision, so the Court deleted 'forthwith unconditionally' from the mandamus and set aside the prohibition.

p. 4
03

Mandamus against the 'Commissioner of Motor Vehicles' to issue a log book

Holding

Set aside, as no such officer exists and the order had no practical effect

Reasoning

Section 3(1) of the Traffic Act provides for a Registrar of Motor Vehicles responsible for registration and licensing; there is no officer called the Commissioner of Motor Vehicles, so the order would serve no practical purpose. The ground of appeal attacking it was abandoned, but the Court set the order aside in any event.

p. 5

Legal principles established

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  • Where the Commissioner of Customs fails, within two months of a notice of claim, either to require the claimant to institute proceedings or to institute condemnation proceedings himself, the seized thing must be released to the claimant
  • Release of a seized item to its owner remains subject to payment of any applicable duty; the Commissioner is not precluded from collecting unpaid duty merely because the statutory release procedure was not followed

Court orders

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  1. 1.Appeal against the grant of mandamus dismissed, but the words 'forthwith unconditionally' deleted from the High Court's Order No. 2
  2. 2.Appeal against the order of prohibition allowed and the High Court's Order No. 3 set aside
  3. 3.Order of Mandamus No. 4 (directed at the 'Commissioner of Motor Vehicles' to issue a log book) set aside
  4. 4.No order as to the costs of the appeal; each party to bear their own costs incurred in the High Court

The bench

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One judgment of the whole court — no separate or dissenting opinions.

RO
majority
PW
majority
WD
majority
On appeal from
High Court of Kenya at Nairobi
H.C. Misc. Civil Application No. 561 of 2004
Jurisdiction invoked
First appellate jurisdiction under the Constitution/Act establishing the Court of Appeal (appeal as of right from the High Court; not expressly stated in the judgment)

Relief refused

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KRA's challenge to the quashing of the disposal decision (certiorari)

The Commissioner failed to follow sections 200 and 202(2) of the Customs and Excise Act, so the decision below could not be faulted

p. 3

Prohibition restraining collection of duties, penalties and charges

The High Court was wrong to hold that the Commissioner no longer had any right to recover unpaid duty; section 202(4)(b) permits release subject to payment of applicable duty

p. 4

Costs

No order as to the costs of the appeal; each party shall bear their own costs incurred in the High Court.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

We agree with the superior court's decision to the effect that the failure to follow the procedure laid down in sections 200 and 202(2) of Cap 472 precludes the Commissioner of Customs from depriving Mr. R. R. Sanghani of the car.
p. 3Statutory seizure procedure
We see no reason why the Commissioner of Customs should be precluded from collecting the unpaid duty.
p. 4Recovery of unpaid duty
In dismissing the appeal against the grant of the order of mandamus therefore, we order that the words "forthwith unconditionally" be deleted from the superior court's Order No. 2
p. 5Final orders - variation of mandamus
As both parties to the appeal have succeeded to some extent we make no order as to the costs of the appeal and we further order that each party shall bear their own costs incurred in the High Court.
p. 5Final orders - costs

Issues in the judgment

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minor

The Memorandum of Appeal refers to Seizure Notice No. 073246 whereas the judgment elsewhere records Notice of Seizure DN: 023246

minor

The judgment refers to the respondent's letter of claim inconsistently as dated 4th June 2001 and as 'his letter to the appellant dated 7th June 2001'

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kenya Revenue Authority v Rajendra Ratilal Sanghani [2006] KECA 173 (KLR)", Case Analysis (2006). Civil Appeal 95 of 2004. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2006/173/eng@2006-07-14

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.