The Kenya Revenue Authority (KRA) has faced a setback in its attempt to double excise stamp taxes on various commodities, as the Court of Appeal has upheld an order preventing the implementation of the controversial regulations.

The court's decision comes after the Law Society of Kenya (LSK) contested the regulations earlier this year, arguing that the proposed tax increase posed a severe threat to manufacturing businesses dealing in consumables.

The regulations, introduced at the beginning of the year, aimed to adjust the pricing of excise stamps for excisable goods by raising the associated costs.

However, in May, the court intervened and restrained KRA from enforcing the regulations, responding to LSK's assertion that the increased costs were unjustifiable and jeopardized the survival of manufacturing enterprises.

KRA, expressing concern over potential revenue loss, had appealed to the Court of Appeal, asserting that the inability to implement the regulations would impede its ability to procure excise stamps, requiring the use of tax funds for the procurement.

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Nevertheless, a three-judge Bench, comprising Justices Helen Omondi, John Mativo, and Grace Ngenye, dismissed KRA's argument.

Justice Omondi remarked, "Therefore, the claim that the appeal will be rendered nugatory on account of emasculation of its tax collection mandate is a far cry in the wild; and cannot hold."

The judges emphasized that the High Court had not prohibited KRA from collecting revenue based on the existing stamps while the petition awaited a final determination.

LSK had filed a lawsuit against KRA, the Treasury, and the Attorney-General, contending that the regulations lacked public participation and were improper in seeking to increase excise stamp prices without due process.

LSK argued that such oppressive taxes were unconstitutional, citing the absence of regulatory impact assessments before Parliament, as mandated by Section 11 of the Statutory Instruments Act.

The court ruling underscored the obligation of state organs to operate in compliance with the Constitution and statutory laws.

"The exercise of this mandate contrary to the law not only prejudices the petitioner but the public at large." The decision highlighted that public interest outweighed KRA's mandate in this context, and conservatory orders were necessary to ensure justice was served," the judge emphasized.

The proposed regulations, if enacted, would impact excise stamp fees for a range of products, including bottled water, juices, non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products, and export items.

The court's intervention provides a reprieve for both consumers and manufacturers, emphasizing the significance of adhering to legal processes in matters of taxation and regulation.