Keroche Breweries appeals order to pay KRA KSh9 billion in taxes

By Nancy Marende | A multi-billion shillings tax dispute pitting the Kenya Revenue Authority (KRA) against Keroche Breweries looks set to brew further.

This is after Keroche Breweries said it would appeal a decision by the Tax Appeals Tribunal ordering it to pay Ksh9,116,835,985 billion in taxes to the KRA.

The case against Keroche involved the contentious manufacturing process of the Vienna Ice brand of vodka as well as the classification of pineapple-based wines.

Keroche, which filed six appeals between 2015 and 2017, argued that Vienna Ice Vodka was not a distinct product from Crescent Vodka since Vienna Ice was produced by diluting Crescent Vodka, hence the process did not amount to manufacture.

KRA, however, stated that the process undertaken by Keroche amounts to manufacture as is illustrated in the Compounding of Denatured Spirits Act Cap 123 as well as the Customs & Excise Act, CAP 472.

In its ruling, the Tax Tribunal said: “Keroche Breweries Limited was involved in the compounding of spirit which amounts to manufacture within the meaning in Excise Duty Act, 2015 and Customs and Excise Act, CAP 472 (repealed) as such Vienna Ice was a distinct product for which Excise Duty was payable.”

With regard to fortified wines produced by the brewer, the Tribunal ruled that Keroche’s wine is a mixture of fermented pineapple and alcohol.

The company argues that what they produced is fortified wines which should be classified under HS Code 22.04 thereby attracting lower excise duty rate of 40 percent.

In response, KRA held that HS code 22.04 was reserved for wines based on grapes yet Keroche’s fortified wine was purely fermented pineapple hence is classified under HS Code 22.06 which attracts a higher excise duty rate of 60 percent.

Terming the Tax Appeal Tribunal’s ruling on taxation of its fortified wines as malicious, Keroche Breweries said the ruling is an attempt to reverse a 14-year old High Court judgement that quashed a KSh. 1.2 billion tax claim by KRA against Keroche.  

Keroche Breweries has also termed the Tribunal’s decision as retrogressive and anti-entrepreneurship, saying the Tribunal refused to recognize that its innovation to dilute its vodka with distilled water should not be subjected to punitive taxation.