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Billionaire industrialist Narendra Raval is seeking to resolve a $12 million tax dispute between his company, Devki Steel Mills Limited, and the Kenya Revenue Authority through an alternative dispute resolution process.
Lawyers representing the steel manufacturer told the High Court in Mombasa that both sides are engaged in serious negotiations aimed at settling the matter outside court. The case pits Devki against the Treasury Cabinet Secretary and the revenue authority over a VAT claim tied to imported plant and machinery.
Counsel for Devki informed the court that a formal letter had been sent to the defendants indicating that discussions were underway and that there had been intervention to explore an amicable solution.
Lawyers for the revenue authority confirmed receiving correspondence suggesting that a settlement had been reached and that Devki was ready to withdraw the suit. Justice Florence Wangari directed both legal teams to confirm their respective client positions before the matter proceeds further.
At the heart of the dispute is a claim for $12 million in VAT relating to equipment imported for the establishment of Devki mega steel factory. The company argues that it was granted a VAT exemption in 2020 and that the Treasury had undertaken to settle the tax with the revenue authority.
Devki says it applied for the exemption in June 2020 at a time when the Covid 19 pandemic had strained cash flows. According to court filings, the Treasury Cabinet Secretary approved the request and formally communicated the undertaking to the Kenya Revenue Authority.
The company maintains that based on that approval, it cleared its imported machinery on a VAT free basis and proceeded to establish the steel plant, which now employs nearly 10,000 people.
Years later, however, Devki received a demand from the revenue authority claiming that more than $10 million in VAT had not been remitted by the Treasury. The authority later revised the demand to $12 million, including penalties and interest.
Devki argues that the move to reverse the exemption four years later is unlawful, unreasonable and contrary to constitutional guarantees of fair administrative action. It says the withdrawal of the undertaking violates its legitimate expectation that the tax had been lawfully exempted.
The company is seeking court orders restraining the revenue authority from demanding the VAT and compelling the Treasury to honour its original undertaking.
In its defence, the revenue authority contends that the alleged undertaking lacked the signature of the responsible Cabinet Secretary, raising questions about its validity. It argues that proper authorization is essential, particularly where substantial tax liabilities are involved.
The case, which touches on tax policy, administrative authority and investor confidence, is scheduled for mention next month as negotiations continue.
