Kenyan Court of Appeal declines to halt reshipment of under-declared rice to Zanzibar

KENYA – The Kenyan Court of Appeal has declined to halt the reshipment of a consignment of condemned rice back to Zanzibar, its place of origin.

The ruling follows a case brought by three Kenyan businessmen and politicians—Maur Abdalla Bwanamaka, Ali Mohamed, and Abdula Hussein Mer—and their firms, Federal Investments Commercial Ltd and Captain Shipping Agency Ltd.

KRA charged them with falsifying the ship’s manifest declared at the Old Port Customs Station in Mombasa.

The businessmen allegedly presented a forged dhow manifest indicating 1,000 bags of rice and 10 tonnes of scrap metal. In contrast, the actual quantity was found to be 15,045 bags of rice and 16 tonnes of scrap metal.

This resulted in the under-declaration of 14,045 bags of rice, which had a customs value of KES22.5 million (US$171,755).

KRA described the vessel’s seizure as disrupting an attempted smuggling operation by a cartel of importers who sought to subvert proper customs clearance procedures.

The vessel was impounded after the importer, Federal Commercial Investment Ltd, attempted to unload the cargo without paying taxes estimated at more than KES13 million (US$99,236). The importers were accused of under-declaring the cargo to reduce their tax obligation.

Appellate Judges Stephen Kairu, Agnes Murgor, and Kibaya Laibuta also refused to order the refund of the KES3.2 million (US$24,427) fine imposed on the traders who brought the cargo into the country.

The judges dismissed an application by the Kenya Revenue Authority (KRA) to stay the execution of a High Court judgment that had 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 stated.

They also noted that some respondents had already left the jurisdiction, rendering the basis for a stay of the acquittal of the respondents unmerited.

A magistrate’s court had initially found the businessmen guilty, fining them US$5,000 each or, in default, serving 12 months in prison.

Mr. Mer received an additional fine of US$10,000 or a 12-month jail term for transporting under-declared imported goods.

Mr. Bwanamaka was ordered to pay KES9.6 million (US$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.

However, upon appeal, the High Court acquitted the businessmen and ordered a refund of the fines, citing KRA’s failure to prove their case to the required standard.

KRA then appealed to the Court of Appeal and sought a stay of execution of the High Court ruling, arguing that the rice might be shipped out of the country and that some traders, seafarers of Indian nationality, posed a flight risk.

They also argued that the High Court’s judgment would impede the enforcement of tax evasion laws. However, the Court of Appeal rejected this application.

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