Devki Group faces legal challenge over $30.8-million tax dispute with Kenyan treasury

Oluwatosin Racheal Alabi -

Key Points

  • Sh4-billion ($30.8 million) tax dispute involving Raval’s Devki Steel and Cemtech.
  • The Treasury withdrew VAT exemptions granted in 2015 and 2020.
  • KRA demands more than Sh4 billion ($30.8 Million) in unpaid taxes and penalties.

Industrialist Narendra Raval’s Devki Group is locked in a high-stakes legal battle with the Kenyan government over a Sh4 billion ($30.8 million) tax demand, following the revocation of tax exemptions granted to its companies, Devki Steel Mills Ltd and Cemtech Ltd.

Revoked tax exemptions ignite dispute

The tax demand was issued by the Kenya Revenue Authority (KRA) after Treasury Cabinet Secretary John Mbadi annulled exemptions granted during the previous Jubilee administration. In an October 2, 2024, letter, Mbadi declared the waivers for machinery and plant imports used in Raval’s clinker and steel factories as unlawful, citing lack of legal backing. The revocation followed an official decision to withdraw exemptions granted in 2015 and 2020.

Following Mbadi’s move, KRA issued a demand for Sh1.6 billion ($12.32 million) from Devki, including Sh1.3 billion ($10.01 million) in principal taxes, a penalty of Sh69 million ($379,500), and Sh152 million ($834,000) in interest. Cemtech Ltd is facing a larger bill of Sh2.4 billion ($18.48 million), which includes Sh2.1 billion ($16.17 million) in principal taxes, Sh105 million ($808,500) in penalties, and Sh199 million ($1.53 million) in interest.

Legal battle to protect investments

In response, Devki and Cemtech have filed separate lawsuits to compel the government to honor its earlier commitments. Represented by lawyer Griffins Timbe, the companies argue that the tax imposition threatens their operations and jeopardizes Kenya’s industrial growth. Timbe emphasized that the plants were exempted as part of the country’s industrialization strategy, and the sudden reversal of tax exemptions is unfair and discriminatory, especially given that other firms with similar exemptions have not faced such challenges.

Raval’s ongoing investments, including an $85-million iron ore processing plant in Taita Taveta, further highlight his commitment to Kenya’s industrial sector, despite the legal challenges. Mbadi maintains that the exemptions were not legally justified and insists that the responsibility for tax payment lies with the taxpayer, as per the East African Community Customs Management Act, 2004.

Justice Florence Wangari is overseeing the case, which is expected to have major implications for Kenya's investment climate and fiscal policy.