Four salt mine owners in Kilifi who also double up as large scale salt producers in the country and East Africa got a major reprieve after the High Court issued an injunction directing the County Government of Kilifi to stop levying or charging of cess for salt.
This was after a declaration, by the court, that the First Schedule Part 1, Cess on salt in the Kilifi County Finance Act, 2018 is inconsistent with and in violation of the constitution and is null and void ab initio (from the beginning).
“The imposition of cess is a violation of Articles 185 (2) and 187 (2) (b) of the constitution as it falls outside the functions assigned to the county government under Part 2 of the Fourth Schedule of the constitution,” ruled Justice Mugure Thande.
Krystaline Salt Company Ltd, Ken Salt Company Ltd, Malindi Salt Works and Kurawa Industries sued the county government of Kilifi and the County Assembly of Kilifi challenging the devolved unit’s demand for cess under the Kilifi County Finance Act,2018, (First Schedule Part 1 ,Cess on Natural resources in the Finance Act).
The court also ruled that the imposition of cess on salt in the Finance Act,2018 was unconstitutional for violation of Article 10 (2) of the constitution for failure to facilitate meaningful public participation.
Justice Thande noted that the power of a county to impose taxes is limited to property rates and entertainment taxes and any other tax authorized by an Act of Parliament.
“The respondents have not demonstrated to court that there is any Act of Parliament that has authorised the imposition of cess on salt by the county. I find that the imposition of cess on salt violates express provisions of Article 209 (3) of the constitution,” ruled Justice Thande.
She further said that a county government is empowered under the constitution to impose charges for the services they provide but it must be demonstrated that any charges imposed are in exchange of a public need or amenity.
“A county government thus does not have the authority to charge a cess, levy or tax where it does not offer anything in return,” said the court.
The court further noted that the county government’s assertion that cess imposed was for use in the provision of essential services to residents rather vague and did not state the exact amenity or service in exchange for which it (cess) was imposed.
Justice Thande, who found the imposition of cess on salt was a violation of the constitution, further ruled that the imposed cess on salt prejudices national economic policies and economic activities within and across counties and discourages investment.
The court also said there was violation of Article 209 (4) and (5) as imposition of the cess on salt was not charge for services provided by the county and undermines and prejudices national economic policies, economic activities across county boundaries and national mobility of goods.
The salt mining firms had told the court that there was no meaningful public participation as the respondents excluded key stakeholders and the public in the process.
The petitioners contended that the notice given to them and other stakeholders about the legislative and policy measures under consideration was inadequate and timelines given for participation were unreasonably short.
Krystaline Salt Company Ltd, Ken Salt Company Ltd, Malindi Salt Works and Kurawa Industries also contended that imposing cess on salt amounted to taxing a natural resource which is outside the county’s mandate.
The County Government of Kilifi and the County Assembly argued that the Finance Act was subjected to public participation.
They also told the court that they facilitated public participation by issuing a notice calling for submission of memoranda or comments and physical engagements in regional centres.
The respondents also argued that the fact that someone was not heard was not enough to annul the process and that there was no obligation for the county assembly to give written reasons for adopting or rejecting any proposals received.
However, the court noted that failure to have forums at ward level cut off many members of the public who would have participated but were hindered by the long distances and cost of travel.
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