The Tax Appeals Tribunal has barred the Kenya Revenue Authority (KRA) from reopening tax assessment files older than five years without proof of fraud, handing Coca-Cola bottler Almasi Bottlers a partial victory in a Sh34.2 million excise duty dispute.
At the same time, the tribunal affirmed the taxman's authority to enforce inflation-adjusted excise rates after court orders suspending them were lifted.
In its ruling on the statutory limits governing tax audits, the tribunal stated that KRA could not demand records or issue assessments beyond the five-year limitation period unless it pleads and proves fraud, wilful neglect or tax evasion.
The findings emerged from a tax dispute that started after KRA conducted a physical stock verification at Almasi Bottlers' Nyeri and Eldoret plants in March 2025 before issuing an additional excise duty assessment.
The beverage manufacturer challenged the decision after KRA confirmed the assessment through an objection decision issued in August 2025.
Almasi, an affiliate of the Coca-Cola group, argued that KRA wrongly relied on inflation-adjusted excise duty rates introduced through Legal Notice No. 217 of 2021 despite High Court conservatory orders preserving the previous rates during ongoing litigation.
The company also disputed KRA's reliance on records relating to accidental breakages and DEFCO sales dating back to 2018 and 2019, arguing those periods had become statute-barred.
The tribunal rejected Almasi's challenge to the excise rates, finding KRA lawfully applied the revised rates after the High Court lifted the conservatory orders on August 26, 2024.
"It is thus clear that the said assessment was issued after the orders of stay had been lifted. Accordingly, the Respondent did not disregard or disobey the stay orders,” the tribunal said.
However, the judges agreed that KRA exceeded its statutory powers by relying on records older than five years without alleging fraud or deliberate tax evasion.
"The law is thus clear that assessment can only go back five years, and a taxpayer is also only required to keep records for a period of five years," the tribunal said.
It added, “Any assessments or records demanded for the years 2018 and 2019 related to adjustments and sales were unlawful and statute-barred unless fraud, wilful neglect, or tax evasion was pleaded and proved.”
The tribunal found none of those grounds had been pleaded or established. It therefore ordered KRA to set aside assessments dependent on records predating March 2020, uphold assessments covering March 2020 to April 2025, and issue a fresh objection decision within 30 days.
The case stemmed from a stock variance identified during KRA's audit, after Almasi manually adjusted production volumes in its excise returns to offset higher inflation-adjusted rates already configured in the iTax system, while the court challenge remained pending.
The company argued it had acted to ensure the correct duty remained payable while the conservatory orders remained in force.
KRA countered that the manual adjustments created a discrepancy of more than 3.9 million litres between declared stock and physical inventories, justifying the additional assessment.
Before the hearing, both sides settled part of the dispute through alternative dispute resolution, leaving only the Sh25 million assessment arising from the inflation-related stock variance to be determined.
The tribunal also faulted Almasi for failing to place key supporting documents before KRA during the objection stage, saying taxpayers cannot rely on evidence first introduced during an appeal.
"The appellant has engaged in mere assertions in this appeal without providing evidence," the tribunal said, adding that, "a mere statement in pleadings is not evidence."
