Kenyan court declines to stop return of bad rice to Zanzibar

The Kenyan Court of Appeal has declined to stop the reshipment of condemned rice to Zanzibar, where the consignment originated.

Appellate Judges Stephen Kairu, Agnes Murgor, and Kibaya Laibuta also refused to order the refund of the Ksh3.2 million ($24,427) fine imposed on the traders who brought the cargo into the country.

The judges rejected an application by the Kenya Revenue Authority (KRA) to stay the execution of a High Court judgment that ordered the refund of the money and the reshipment of the rice.

“In seeking stay orders in this regard, we were not told how declining a stay in respect of the shipping of rice declared unfit for human consumption would render the intended appeal nugatory,” the judges said.

“We also bear in mind both counsel’s concurrence that some of the respondents have already left the jurisdiction of the court. As a consequence, the basis for a stay of the acquittal of the respondents has therefore not been met.”

Kenyan businessmen and a politician, Maur Abdalla Bwanamaka, Ali Mohamed, Abdula Hussein Mer, and their firms, Federal Investments Commercial Ltd and Captain Shipping Agency Ltd, faced two charges, in which KRA accused them of falsifying the ship's manifest declared at the Old Port Customs Station in Mombasa.

According to the KRA, the businessmen presented a forged dhow manifest indicating that the vessel had declared its cargo imports of 1,000 bags of rice and 10 tonnes of scrap metal.

However, upon discharge of the cargo and physical verification, it was found that the actual quantity was 15,045 bags of rice and 16 tonnes of scrap metal, resulting in an under-declaration of 14,045 bags of rice. The taxman told the court that the undeclared goods had a customs value of Sh22.5 million ($171,755).

At the time, KRA described the seizure of the vessel as a disruption of an attempted smuggling operation “by an unscrupulous cartel of importers who had been peddling their influence to subvert proper customs clearance procedures at the Old Port Customs Station.”

The KRA said the vessel was impounded after the importer, Federal Commercial Investment Ltd, attempted to unload the cargo without paying taxes estimated at more than Ksh13 million ($99,236).

The taxman also accused the importer of under-declaring the cargo to reduce its tax obligation.

A magistrate’s court found the businessmen guilty and fined them $5,000 each or, in default, to serve 12 months in prison.

Mr Mer was also fined $10,000 or a 12-month jail term for transporting imported goods that were under-declared.

The magistrate also ordered Mr Bwanamaka to pay Ksh9.6 million ($73,282) in unpaid taxes or serve two years in prison.

The rice was ordered to be destroyed as it was unfit for human consumption.

Through their lawyer, Leonard Shimaka, the businessmen appealed to the High Court, which acquitted them and ordered a refund of the fines they had paid after finding that KRA had failed to prove the case to the required standard.

KRA then appealed to the Court of Appeal.

The taxman also filed an application for a stay of execution of the High Court ruling and its consequential orders pending a hearing and determination of the appeal.

KRA complained that the rice was likely to be shipped out of the country and that some of the traders, who were seafarers of Indian nationality, posed a flight risk.

The taxman also argued that the High Court's judgment would have the effect of curtailing the administration of laws designed to deter tax evasion.

However, this application was rejected.