When Kenya Revenue Authority officers were conducting a routine check on VAT claims on Congo-bound exports, they noticed something strange with some goods cleared by Sky and Sea cargo limited.
The taxman officials could tell that the goods traveled to Busia border between Kenya and Uganda but they disappeared into thin air without a trace soon after.
A total of 256 products being shipped on 63 truckers were on ledgers in Kenya but they vanished mysteriously in the portal as Ugandan officials waited for them across the border.
KRA officials did not suspect magic, but rather they might have stumbled upon a huge tax evasion scheme.
They quickly launched investigations on the owner of the goods, who turned out to be Tuffsteel, a firm that operates as a distribution and factory outlet for construction materials including cement, steel, roofing, and bitumen.
According to filings at the tax appeals tribunal, the investigators sought to know whether the goods had left Kenya and it quickly hit them that if indeed they had, they must have passed through Busia weighbridge just 5 kilometers from the border and the details of the trucks must be on record.
KRA says that it analyzed documents tendered by Tuffsteel including certificates of exports but they were convinced the goods never left the country because the trucks were missing at the Busia weighbridge that is run by the Kenya National Highways Authority (Kenha).
The taxman also interviewed Mathias Nyamabe the owner of two trucks that were allegedly used to ship the cargo and he recorded a statement that at no time were his trucks used to move goods from Kenya to Congo.
The proof of export was also not corroborated by evidence from the Ugandan Revenue Authority which had records of the trucks.
KRA then decided to tax the 256 items carried by the 63 trucks and slapped Tuffsteel with a Kes207.9 million tax demand.
“On this basis, KRA sought for more documents to proof export as there was reason to believe that this was a fraud case,” KRA said.
But the tribunal feels KRA did not have a watertight case to charge Tuffsteel since one, KRA had no business enforcing compliance with customs procedures in a foreign country, and that the steel and cement producer was not required to furnish KRA with transit declarations on exports to Uganda.
The tribunal said while KeNHA was a competent authority, it could only confirm breaches in weighbridge procedures and not with high certainty that the trucks ferrying goods never reached Busia.
They said the report should have been corroborated by other State agencies at the port of exit such as the police and immigration who keep records of all persons and vehicles crossing the border at the station.
The tribunal also held KRA did not claim that Tuffsteel export certificates were fake and if true that the goods never left the country then KRA officials had colluded with the exporter to falsify the outward rotation register.
On the owner of the trucks used, the tribunal held that he had not been in constant contact with his drivers and that there was no attempt by KRA to get the drivers to testify.
Tribunal said Tuffsteel had established the time when the goods were exported and the authenticity of the unchallenged certificates was conclusive evidence the goods were exported and set aside the tax demand.