Negotiations are on Between Devki Steel Mills Ltd and Treasury Over Sh1.6 Billion Tax Claim

By The COAST Reporter

Email, thecoastnewspaper@gmail.com

Alternative dispute resolution process is in play over a court case pitting Devki Steel Mills Limited against Treasury cabinet secretary and Kenya Revenue Authority on Sh1.6 billion VAT tax claim dispute.

Through its lawyer, the steel miller told the court on Monday, February 16, 2026 that it had filed a letter informing the defendants that there has been intervention for the case to be solved amicably.

“The parties are pursuing serious out of court negotiations,” the lawyer said.

KRA through its lawyer, told the court that Devki in its letter had indicated that they had reached a settlement and were ready to withdraw the case.

Justice Florence Wangari, sitting in Mombasa, directed the lawyers to confirm with their clients the positions relating to the issue.

Devki Steel Mills Ltd which is associated with billionaire businessman Narendra Raval seeks to have the authority and the CS restrained from claiming Sh1.6 billion as Exempted VAT on plant and machineries which it had imported for the establishment of a mega steel factory.

The company also seeks to bar the treasury from reneging on its undertaking of June 29, 2020, to pay the Exempted VAT to KRA.

Devki Steel Mills Ltd also seeks to bar the authority from claiming from it the Exempted VAT.

It wants among other orders a permanent injunction restraining the treasury and KRA from claiming or demanding Sh1.6 billion, penalties and interests as stated in the KRA’s letter dated September 6, 2024.

Devki Steel Mills Ltd says the decision by the CS Treasury and KRA to demand VAT four years after exemption when it is statutorily barred from claiming input VAT is unlawful, unfair, unreasonable, unjust and goes against the express provisions of Article 47 of the constitution.

The company argues that the decision by the defendants to withdraw their own decision allowing it tax exemption after four years is unlawful, null and void.

Devki Steel Mills Ltd says that the VAT exemption given by the CS Treasury was already utilized and goods released thus his decision to withdraw the undertaking is late and has been overtaken by effluxion of time.

“The decision by the defendants to go against their representation and undertaking to the plaintiff violates the plaintiffs’ legitimate expectation that it was exempted from paying taxes,” part of the suit documents state.

Devki Steel Mills Ltd also argues that the decision to specifically target it is discriminatory and unlawful.

“The plaintiff has tried everything within its means to settle this matter amicably but the defendants have refused making the filing of this suit necessity, “argues Devki Steel Mills Ltd.

It argues that the amount sought to be recovered by the defendant is so huge that unless they are retrained, it will be completely removed out of business rendering the case nugatory.

According to the company, it wrote a letter on June 23 2020 to the CS Treasury requesting VAT exemptions on plant and machineries.

Devki Steel Mills Ltd claims that the VAT exemption was necessitated by lack of cash flow during the economic recess resulting from Covid-19 pandemic and that the steel factory was and still is a strategic investment that would spur economic growth.

“The request for application went through the CS Treasury’s approval process and by a letter, the CS wrote to KRA informing it that he has FOR VAT exemption of plant and machineries,” argues the company.

The company says that the CS Treasury in the letter expressly undertook to pay the VAT on the plant and machinery imported for the implementation of the mega steel project factory.

Devki Steel Mills Ltd says that upon approval of the exemption, KRA wrote to it informing that the government has undertaken to pay VAT due on the plant and machinery and advised it to proceed to release the goods on VAT free basis.

“The plaintiff cleared all the plants and machineries imported, commenced the steel factory which now processes steel locally and has employed close to 10,000 people,” part of the suit documents state.

The company says that it has been operating the factory peacefully until when it received a demand letter from KRA to the effect that it (KRA) had conducted an audit and established that Sh1.3 billion VAT which it had been exempted was yet to be remitted by the CS.

Devki Steel Mills Ltd says that it wrote a letter to KRA objecting to the claim and further advised it that the tax exemption if owing is as per the undertaking payable by the CS Treasury.

It says that KRA went silent only to reappear after a year through a letter dated September 6 informing it that the CS has not honoured its undertaking and that it (company) should immediately pay the tax exemption plus interest and penalties totalling to Sh1.6 billion.

Devki Steel Mills Ltd say that it wrote to the Treasury CS requesting for intervention to resolve the issues.

However, it says that in a complete twist of events and in breach of its own approval for exemption and written undertaking, the CS by a letter dated October 2 purportedly withdrew its undertaking on the grounds that there were no legal provisions supporting the undertaking and that it (company) should pay the tax being demanded by KRA.

The company is also seeking a mandatory injunction compelling the CS Treasury to forthwith settle the Sh1.6 billion with the KRA.

It is also seeking a declaration that the undertakings issued by the CS Treasury and a letter by KRA created a legitimate expectation on its part that VAT was exempted and the defendants are stopped from going against their undertakings.

In its statement of defence, KRA says that before the Finance Bill 2020 came into effect, the Plant Machinery of chapter 84&85 of the VAT tax were exempted from the import tax.

It says that the alleged undertaking lacks the signature of the responsible CS which is a critical element of its validity.

“The absence of the signature raises concerns regarding the authenticity and legitimacy of the undertaking, given the substantial tax liabilities involved it is essential that all procedural requirements including proper authorization are fully met,” says KRA.

The case will be mentioned next month.