London Distillers (K) Ltd must pay Sh517 million in excise taxes after the Court of Appeal upheld the Kenya Revenue Authority’s refusal to honour a National Treasury directive that would have wiped out 80 percent of the company’s tax liability — taxes already collected from ordinary Kenyan consumers but never remitted to the government.
The three-judge appellate bench ruled decisively that Treasury Cabinet Secretary Ukur Yatani had no legal authority to order the abandonment of taxes that a manufacturer had already deducted from consumers on behalf of the state. KRA, backed by the Attorney-General, had refused to implement the directive — and the court said that refusal was entirely lawful.
“We agree with the trial court that he had no such powers. That abandonment was illegal, and the respondent was not bound to act on it,” the judges stated plainly.
How a Sh895 Million Tax Debt Became a Political Favour
The trouble started when London Distillers conducted a self-assessment covering January 2020 to August 2021, declaring excise duty of roughly Sh895 million. The company paid part of it and left an outstanding balance of about Sh529 million. When KRA came knocking, the distiller took its case to the Tax Appeals Tribunal, where both parties agreed on a structured repayment plan — which London Distillers promptly failed to honour.
Rather than settle its debt, the company went straight to the National Treasury. In January 2022, the CS formally notified KRA that he had approved the abandonment of 80 percent of the principal tax, plus a full waiver of all penalties and interest. KRA then demanded only the remaining 20 percent — about Sh80 million — and London Distillers began making weekly instalments of Sh7.5 million.
That arrangement collapsed fast. KRA sought a legal opinion from the Attorney-General, who concluded that the Cabinet Secretary’s directive was unlawful because the taxes had already been collected from consumers. The directive was withdrawn. On March 2, 2022, KRA informed London Distillers that the waiver was rescinded and demanded full payment of Sh517.1 million within seven days.
London Distillers ran to the High Court, arguing that KRA had acted arbitrarily, that the company had never received formal notice of the withdrawal, and that KRA had overstepped by ignoring a superior authority’s decision. The High Court dismissed the petition. The Court of Appeal has now done the same.
Why This Ruling Matters Beyond One Company’s Tax Bill
The court’s language was deliberate and pointed. It warned that allowing Cabinet Secretaries to override legally collected taxes would open a dangerous door:
“If the Commissioner were to comply with all directives, including those that are contra statute, then the Government will never collect any revenues because all that taxpayers would require to escape from their tax obligations is to know someone at the National Treasury,” the judges wrote.
The ruling draws a firm legal line: under Section 37(3) of the Tax Procedures Act, KRA is only obligated to implement directives from the Cabinet Secretary that are lawful. A directive to abandon taxes already extracted from consumers — money that was never London Distillers’ to keep — does not qualify. The company now faces the full Sh517 million bill, with no more legal avenues left to dodge it.
