Angelica Medical Supplies Caught Up In A Ksh. 27m Tax Evasion Scandal

By The Weekly Vision

Before the dust settles on the investigations currently being carried out by the Senate’s Ad hoc committee on Angelica Medical Services which is implicated in a multi-million tender fraud for the supply of consumables and reagents for Renal (Lot 5) and Radiology (Lot 7) equipment at the Kenya Medical Supplies Agency, the company is at it again over tax evasion racket.

The Senate had investigated a case in which Angelica Medical Supplies had been handpicked as a supplier for consumables and reagents. It has now come to the public domain that despite winning multi-million tenders fraudulently, the company never paid taxes to the government. A Tax Appeals Tribunal Appeal NO. 258 OF 2021 against a decision by the Commissioner Of Customs & Border Control over the non-payment of Ksh. 27,730,065.00 being import Duty, VAT and late payment interest accrued, the tribunal dismissed their appeal and upheld KRA’s demand of the same.

Upon receiving a demand letter from KRA, Angelica Medical Supplies lodged an appeal on 18th February 2021 asserting that it had correctly declared dialyzer under tariff code 9018.39.00. KRA subsequently, vide a letter dated 24th February 2021 responded to their letter granting them seven days, within which to provide substantive responses to its letter of findings, failure to which the taxes amounting to Ksh. 27, 730, 065,00 would be officially demanded. Angelica Medical Supplies vide a letter dated 25th February 2021 responded to KRA’s letter dated 24th February 2021 reiterating its earlier position as contained in the letter dated 18th February 2021.

Subsequently, KRA vide a letter dated 16th April 2021 issued a tax decision demanding payment of additional taxes amounting to Ksh. 27,730,065.00 being Import Duty, VAT and late payment interest. Aggrieved by the tax decision, Angelica Medical Supplies filed a Notice of Appeal on 14th June 2021. In their submission, Angelica Medical Supplies claimed that contrary to KRA’s contention, dialyzer diapers steam is the scientific name for an artificial kidney owing to it performing the functions of a human kidney.

In a ruling dated 17th March 2023 by Eric N. Wafula (Chairman), he noted that the essential character of a dialyzer is for the performance of dialysis in patients with renal failure which involves the purification of blood in the human body. Prudence, therefore, dictates that dialyzers should be classified together with other medical equipment under Heading 9018 as opposed to a generic classification for filters used for industrial processes which cannot be used to filter human blood.

The ruling further reads “The upshot of the foregoing is that this Appeal is not merited and the Tribunal accordingly makes the following Orders: -The Appeal be and is hereby dismissed. The correct tariff for classification of the dialyser diapes steam imported by the Appellant is 8421.29.00. The Respondent’s demand notices dated 16th April 2021 for Ksh. 27,730,065.00 be and is hereby upheld”.

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