The Supreme court has dismissed Kenya Revenue Authority's (KRA) request to their request to force a rice importer to pay Ksh378million in a tax dispute that saw him walk away with Ksh500million unpaid tax.
Issuing the ruling, the judges led by Justice Philomena Mwilu dismissed their request citing failure to calibrate the Tradex Simba System.
The system is an automated tax collection and import clearance system that differentiates the origin of various goods getting into the country.
The judges further highlighted that it was nonsensical for the importer to pay for the mistake of the taxman.
"The appellant acted unfairly in demanding for the alleged short levied duty almost 4 years after the initial assessment and payment of the duty so assessed were irrational and did not accord the respondent its right to fair administrative action," Deputy Chief Justice Philomena Mwilu ruled.
KRA blames human error
The development comes after the taxman blamed its human resource for the dispute that saw the importer take off with Ksh500 million
KRA disclosed that their systems recorded that the rice imported by Export Trading Company Ltd was from Pakistan despite the rice coming from a different country.
They claimed that the human and system error failed to differentiate the country of origin of the company, they added that the error resulted in the preferential tax rate reading as 35 per cent instead of 75 per cent.