Keroche bid to vary order on Sh500m deposit fails

Wednesday, May 13th, 2020 20:49 |
Keroche Breweries proprietors Joseph and Tabitha Karanja in court over tax evasion claims. The Tax Appeals Tribunal has given KRA the go ahead to collect Sh9.1 billion tax from Keroche. Photo/PD/File

Keroche Breweries Ltd was dealt a blow yesterday when the High Court declined to set aside its earlier orders to have the brewer pay Kenya Revenue Authority (KRA) Sh500 million, pending the hearing of a tax dispute.

In his ruling, Justice David Majanja dismissed the plea by the Naivasha-based brewer to have the order reviewed saying no compelling reasons had been tabled before court to show the firm is unable to pay the money as directed by the court.

“I have considered the facts set out by the appellant (Keroche Breweries Ltd) and I find nothing new has arisen in regard to the nature of the appellant business in relation to its tax ability, hence I decline to vary the appellant an unconditional order of stay,” ruled justice Majanja.

This is after the company, through its chief executive Tabitha Karanja, petitioned the court saying it had no funds to pay the taxman as directed in March.

According to court papers, the CEO also argued that the directive to have the company pay Sh500 million might lead to total collapse of the brewer, with attendant consequences such as employees losing their jobs.

Joint account

The company said it was willing to deposit Sh10 million in a joint income earning account, pending the determination of the case.

The CEO says the order by Justice Majanja was issued during “a very difficult time in this country’s history given the biting effects of Covid-19 pandemic”.

She said following the closure of many business due to Covid-19, the company can only raise the amount through a bank loan, but which is not possible because Keroche is servicing another loan from Absa Kenya.

Karanja said the business is cash intensive and its operational costs for the months had outstripped the revenue collected.

The company is contesting tax demand of Sh9.1 billion, and has accused the taxman of reclassification of its products, backdating of uncollected taxes and change of formula, all in a bid to squeeze more from them.

Job losses

She said she was apprehensive the company, which has been in existence for 23 years, would be greatly affected and with it, the livelihoods of some 300 employees.

At the heart of Keroche’s latest troubles is one of its most popular products, Viena Ice Vodka, which KRA wants taken off the list of fortified wine products.

Fortified wines are alcoholic drinks that have a distilled spirit added to them. The taxman argues that the fortified wine products list is reserved for grape-based drinks, while Vienna Ice is made from fermented pineapples.

But Tabitha said Viena Ice is simply a diluted version of Crescent Vodka, another of the brewer’s products, with water hence the process cannot be equated to manufacture.

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