The High Court has rejected the Kenya Revenue Authority's bid to suspend a Tax Appeals Tribunal decision that classified imported heat pumps under a zero-duty tariff, ruling that the tax collector failed to prove the judgment would trigger substantial losses to public revenue.
The ruling leaves intact a tribunal decision that found Tile & Carpet Centre Ltd's Aertech All-in-One heat pump qualifies for a tariff code attracting zero percent import duty.
It also reinforces the principle that KRA must present concrete evidence, rather than projections, when seeking to halt tax decisions pending appeal.
The court dismissed KRA's application to suspend the tribunal's March 2026 judgment, saying the authority's claim that the decision would encourage other importers to seek similar tax treatment remained unsupported.
"The commissioner's assertion of potential substantial loss of government revenue is speculative," the court said.
It added that KRA had not produced "any tangible evidence" to demonstrate the scale of the alleged revenue loss.
"No financial projections, statistical data or affidavits from industry experts, have been presented to quantify the revenue at risk or to establish a causal link between the Tribunal's decision and the purported widespread adoption of the lower tariff," the court said.
The dispute stems from the Tribunal's March 27, 2026 decision classifying the Aertech All-in-One heat pump under a tariff attracting zero import duty instead of the higher duty sought by KRA.
Three days later, the Commissioner of Customs and Border Control moved to the High Court seeking to suspend that judgment pending determination of an appeal. KRA argued that if the ruling remained in force, importers dealing in similar products could rely on it to claim the lower tariff classification, leading to significant losses in customs revenue.
The authority further argued that the Tribunal's orders were declaratory rather than monetary and therefore no security was required before granting a stay.
Tile & Carpet Centre opposed the application, saying KRA had failed to demonstrate any substantial or irreparable loss. The company argued that the dispute was purely financial and any taxes eventually found payable could still be recovered if KRA succeeded on appeal.
It also said granting a stay would deny it the benefit of a judgment that corrected what it described as an erroneous tariff classification. The court said that KRA had not shown any immediate risk of irreparable loss because the importer remained an operating business capable of meeting any future tax obligations.
"The respondent is a going concern, capable of meeting its obligations, and therefore no substantial loss has been demonstrated," it said. The court also rejected KRA's argument that the Tribunal's decision would automatically affect the wider importing industry.
"While it is conceivable that other importers may attempt to rely on the Tribunal’s reasoning to advance similar arguments, such reliance does not automatically compel the Commissioner to adopt the same tariff classification across the industry,” the court said.
The ruling highlights the commercial importance of tariff classification disputes, which have become increasingly common between KRA and importers because a product's classification determines the rate of customs duty and other import taxes.
Such disputes frequently reach the Tax Appeals Tribunal and the High Court, with businesses challenging KRA's interpretation of customs tariff codes for industrial equipment, manufactured goods and other imports.
The court said the requirements for granting a stay pending appeal are cumulative and that proving substantial loss is the foundation of such applications.
Having failed to satisfy that requirement, the court ruled that the Commissioner could not obtain the orders sought, he ruled.
