The Court of Appeal granted the Commissioner of Customs and Border Control a stay of execution suspending a High Court order that required the payment of Sh21 million in value-added tax (VAT) refunds to Animix Limited, pending the determination of an intended appeal.
In a ruling delivered on January 16, 2026 a three-judge bench comprising Justices Mumbi Ngugi, Francis Tuiyott and Joel Ngugi held that the appeal raised arguable legal questions and that releasing the funds before the appeal is heard could have far-reaching implications for public revenue.
The dispute stems from a tax classification disagreement that began before the Tax Appeals Tribunal.
In a decision delivered on July 12, 2023, the Tribunal ruled that Animix Limited’s imported goods were properly classifiable under HS Code 2309.90.10 and were therefore VAT exempt.
The Tribunal further found that the company was entitled to a refund of input VAT.
The Commissioner of Customs challenged that decision at the High Court, but in a judgment delivered on July 4, 2025, Justice Charles Kariuki dismissed the appeal, upheld the Tribunal’s findings, and ordered the tax authority to process and pay a VAT refund amounting to Sh21,024,116 within 60 days.
Aggrieved by the High Court’s decision, the Commissioner moved to the Court of Appeal under Rule 5(2)(b) of the Court of Appeal Rules, seeking a stay of execution to preserve the subject matter of the intended appeal.
The tax authority argued that while the goods were found to be VAT exempt, it was legally inconsistent for the High Court to order a refund of input VAT under section 17 of the VAT Act, contending that exempt supplies do not qualify for such refunds.
It further warned that the judgment could set a precedent leading to multiple refund claims and substantial losses to the public purse.
Animix Limited opposed the application, maintaining that the appeal was not arguable and that the matter had been conclusively determined by both the Tribunal and the High Court.
The company argued that the order was a money decree and that payment of the refund would not render the appeal nugatory, arguing that it was a solvent entity capable of refunding the amount should the appeal succeed.
In determining the application, the Court reaffirmed that an applicant under Rule 5(2)(b) must demonstrate that the intended appeal is arguable and that it would be rendered nugatory if the stay is not granted, while also taking into account public interest considerations.
The judges held that although the appeal may not ultimately succeed, it raised a legitimate question of law concerning the relationship between VAT exemption and entitlement to input VAT refunds, making it arguable.
On whether the appeal would be rendered nugatory, the Court noted that while money decrees do not ordinarily justify a stay, the present case was distinguishable due to its implications for public revenue and its potential precedential effect.
The Court said that immediate payment of the refund, grounded on a contested interpretation of tax law, could trigger similar claims and expose public finances to irreversible consequences.
“The concern here is not merely whether the respondent can refund a single decretal sum if the appeal succeeds, but whether the immediate disbursement of public funds, grounded on a contested interpretation of tax legislation, may generate systemic fiscal consequences that cannot easily be unwound,” ruled the judges.
The Court also found that public interest favoured preservation of the funds pending appeal.
The judges said that any prejudice to the respondent could be mitigated through an expedited hearing.
The Court has since granted a stay of execution, directed the Commissioner to file the record of appeal and submissions within 30 days, and ordered that the appeal be listed for priority hearing upon compliance.
The stay will lapse automatically if the Commissioner fails to meet the filing deadline.
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