London Distillers is facing bleak future and possible collapse following the latest development by the High Court that the company never foresaw.
The company founded by the late Mohan Galot’s suffered a huge blow after the High Court reinstated a Sh3 billion tax demand issued by the Kenya Revenue Authority (KRA), overturning an earlier decision by the Tax Appeals Tribunal.
Even so, Golath died in the United King-don in June 2025 aged 81 years.
The Tribunal had previously faulted the Commissioner of Domestic Taxes for relying heavily on an input-output analysis based on bottle purchases, arguing that the method did not sufficiently account for other operational factors in determining the company’s production and tax liability.
However, High Court Judge Francis Gikonyo ruled that the Tribunal failed to properly appreciate that the tax assessment was grounded on unexplained variances identified during KRA investigations covering the period between 2015 and 2019.
The judge held that once such discrepancies are established, the burden shifts to the taxpayer to disprove the assessment.
“I agree that not all pur-chased bottles end up in pro-duction and the market. But the basis of the assessment was unexplained variances, and it was the onus of the respondent to prove the assessment was excessive,” the court stated.
KRA had investigated London Distillers’ tax affairs using bank records, excise stamp data, in-voices, and bottle supply information. KRA concluded that the company had under-declared turnover after identifying inconsistencies between declared sales and actual financial and production indicators.
The Tax Appeals Tribunal had earlier found that KRA’s assessment relied mainly on bottle-based input-output analysis and failed to consider other relevant production and accounting data. It also ruled that the methodology used was insufficiently comprehensive.
But the High Court disagreed, finding that the Tribunal misdirected itself by considering issues not raised in the objection, including production records, flow meter readings, and internal ac-counting systems.
The court further noted that Section 56(3) of the Tax Procedures Act places the burden of proof on the taxpayer once the Commissioner identifies credible discrepancies.
According to court records, KRA’s investigation found significant variances between excise stamps activated and products declared for taxation.
Between 2016 and 2018, the company activated 1.61 million excise stamps, equivalent to 527,250 litres of finished product, but declared only 359,162 litres-leaving a discrepancy of 168,088 litres.
A separate analysis based on bottle purchases also revealed variances amounting to nearly 10 million litres. KRA obtained supply data from glass manufacturers Vivek Investments Limited and Milly Glass Works Limited.
Banking analysis further showed that London Distillers received more than Sh23 billion in sales revenue during the re-view period, figures that exceeded declared turnover in its tax re-turns. These findings led KRA to estimate a principal tax liability of Sh2.68 billion before adjustments.
KRA later revised the assessment after considering explanations from the company, including claims of bottle breakages exceeding 11 million units and reconciliations involving excise stamp records and banking data. The final demand stood at Sh2.05 billion.
The company had argued that not all bank deposits represented sales income and that KRA’s assumption that all purchased bottles entered the market was flawed.
It also claimed the assessment wrongly included caps and labels and failed to distinguish between new and second-hand bottles.
London Distillers further maintained that KRA did not conduct sufficient physical verification at its premises before issuing the tax demand.
However, KRA insisted that its findings were supported by multiple independent analytical methods, including excise data from the Excise Goods Management System (EGMS), banking records, and bottle supply analysis, all of which pointed to under-declared production and revenue.
