The High Court in Nairobi has
dismissed an appeal by the Commissioner of Customs and Border Control against
Sai Pharmaceuticals Limited in a long-running tax dispute over the
classification of Vitamin E capsules.
Justice Patrick Otieno, in a
judgment delivered virtually on August 29, 2025, upheld a Tax Appeals Tribunal
(TAT) ruling that EVIT 200 and EVIT 400 capsules should be treated as
medicaments, not food supplements.
At the heart of the case was whether
the products should attract higher taxes as food supplements under HS Code
2106.90.91 or enjoy lower rates as medicaments under HS Code 3004.50.00.
The Kenya Revenue Authority (KRA)
had insisted the capsules were “food supplements” while Sai Pharmaceuticals
maintained they were registered medicines.
The court noted that the capsules
were licensed by the Pharmacy and Poisons Board in 2008 as drugs, and Sai held
valid certificates to distribute them.
“Dealing in food supplements under
such a license would constitute an infringement,” Justice Otieno observed.
The dispute began in May 2021 when
Sai imported a consignment of the capsules, declaring them as medicaments in
line with earlier KRA tariff rulings from 2016.
But the Commissioner later changed
its position, reclassifying the capsules as food supplements and demanding Sh1.4
million in additional taxes.
Sai challenged the move, arguing
that the change was arbitrary and unsupported by scientific evidence.
In its appeal, KRA told the court
that EVIT capsules only offered general wellness benefits, not therapeutic or
prophylactic uses, which are the criteria for medicines under customs law.
It insisted that food supplements
are defined under the Harmonized System as products one would ordinarily get
from daily diets.
But Sai countered with evidence
including the manufacturer’s drug licenses, clinical trials, prescriptions from
doctors, and literature showing the capsules’ role in preventing cataracts,
improving glucose tolerance in diabetics, easing fibromyalgia pain, and
reducing menopausal symptoms.
The judge agreed with the Tribunal’s
finding that the capsules contained Vitamin E at significantly higher doses
than normal dietary intake—200mg and 400mg compared to the recommended 40–50mg
daily allowance.
“The presence of physician
prescriptions for these products also supports their therapeutic use as
medicine,” Justice Otieno said.
A key turning point in the case was
KRA’s failure to provide laboratory test results it cited as the basis for
reclassification.
The court ruled that withholding the
report violated principles of fair process.
“It is unacceptable that a party
would conceal a document used to find in its favour from the court,” the judge
stated.
He added that relying on undisclosed
evidence amounted to “an opaque decision-making process” that undermined the
taxpayer’s right to a fair hearing.
The court further faulted KRA for
disregarding the Pharmacy and Poisons Board’s classification of the products.
While not legally binding, the judge
said such expert opinions carried “substantial persuasive evidentiary weight”
and should not be dismissed without robust justification.
The ruling has wider implications
for importers of health products, who often face uncertainty over shifting
customs classifications.
By upholding the Tribunal’s
decision, the court signaled that consistency, transparency, and scientific
evidence must guide such determinations.
Justice Otieno concluded by
affirming the Tribunal’s order that EVIT 200 and EVIT 400 capsules remain
classified as medicaments.
The judge dismissed KRA’s appeal in
its entirety and ordered the agency to pay costs to Sai Pharmaceuticals.
“In upshot, the court finds no merit in the appeal dismisses
same and gives the appropriate orders that the Appeal by the Commissioner of
Customs & Border Control against the judgment of the Tax Appeals Tribunal
delivered on October 6, 2023 is hereby dismissed,” the judgment read.
