The High Court has stopped the taxman from demanding more than Sh1.6 billion from the Kenya Petroleum Refineries Limited.
In documents filed in court, the only refinery in East Africa accused the Kenya Revenue Authority (KRA) of unlawfully demanding Sh1.63 billion from it arising from alleged tax and penalties.
The Mombasa-based company argued that the move could shut down its operations. The KRA had written to the company in January 2012 demanding the money and accusing it of using some of the refined fuel to run its machines.
But the company maintained that it had used the fuel to operate furnaces and boilers for over 45 years and that the KRA was aware of the fact as its officers are stationed at its premises. In his ruling, Justice George Odunga faulted the KRA, saying it was unfair for the taxman to overlook their prior agreement.
“The respondent ought to have given the applicant sufficient notice of its intention to reverse its earlier position on the applicant’s liability to pay taxes, where the fuel oil was consumed in the furnaces and boilers to produce heat and to run the applicant’s machinery, so as to enable the applicant change its position,” he said.