The founder of Devki Steel Mills Narendra Raval has found himself in the middle of a tax storm. This is after the Kenya Revenue Authority (KRA) made a tax demand amounting to billions from his companies years after a successful tax exemption.
Devki Steel Mills has sued the KRA and the Cabinet Secretary for the National Treasury seeking protection from the claim of Sh. 1.6 billion that was exempted valued added tax (VAT) on plant machinery that Devki imported to set up its steel factory. The VAT was exempted on June 29, 2020.
In its Sh. 1.6 billion demand from Devki, KRA wants Sh. Sh. 1.3 billion in principal taxes and a five per cent penalty estimated at Sh. 69 million. The KRA has calculated the gross duty to be Sh. 1.4 billion with Sh. 152 million in interest for late payment.
The KRA is also seeking Sh. 2.4 billion from Cemtech. Sh. 2.1 billion was principal taxes, of which Sh. 105 million was to be paid as a five per cent penalty. The KRA calculated gross duty as Sh. 2.2 billion with late payment interest of Sh. 199 million.
Devki has told the High Court in Mombasa that it wrote to the Cabinet Secretary for the National Treasury on June 23, 2020 requesting VAT exemptions on plant and machinery. This request was granted.
“The request for application went through the CS Treasury’s approval process and by a letter, the CS wrote to KRA informing it that he had authorized VAT exemption of plant and machinery,” Devki says. “[Devki] cleared all the plants and machinery imported, commenced the steel factory which now processes steel locally and has employed close to 10,000 people.”
Narendra Raval’s Devki Group moves from KCB to Stanbic; gets Sh. 4.3bn financing
The company says that in August 2023, the KRA sent it a demand letter stating that the Sh. 1.3 billion VAT that had been exempted by the National Treasury was yet to be remitted.
Devki then responded and objected to the demand, stating that the tax exemption if owing was as per the undertaking payable by the Treasury.
One year later, in September 2024, the KRA sent another demand letter stating that the Treasury had not honoured its undertaking and that Devki should immediately pay the amount demanded.
The revocation of the VAT exemptions was issued by current Treasury CS John Mbadi in a letter dated October 2, 2024.
“We have taken note of the matter and wish to state that the letters written by the National Treasury and Economic Planning are not supported by any tax law or other legislation. Considering there is no legal provision supporting the undertaking, the letters Ref: DFN 415/402/039 dated December 17, 2020, and Ref: DFN 415/402/039 dated June 29, 2020, from the National Treasury to Cemtech Ltd and Devki Steel Mills Ltd, respectively, are hereby withdrawn,” said CS Mbadi in the letter to Raval’s companies.
Raval’s companies have now asked the High Court to declare Mbadi’s revocation as null and void. The companies have further asked the High Court to compel the National Treasury to settle the exemption with the KRA without reneging on the initial undertaking that facilitated the exemption and the subsequent investment by the companies.
