President William Ruto's government has suspended 27 officials in connection with the illegal sugar.
The sugar in question was imported to the country in 2018 but was flagged by KEBS for want of expiry date specification.
Kebs marked the 20,000-50 kgs bags of sugar as unfit for human consumption.
It then directed that it be destroyed at the owner's cost by either burning or burying.
But it was later decided that the consignment be conversed for industrial ethanol use, which was to be implemented under the joint supervision of KEBS and the National Environment Management Authority (NEMA), within a multi-agency framework.
The process of turning the product into ethanol can only be done at four agencies, which include Kenya Wines Agency and Agro-Chemical and Food Company Limited (ACFC).
However, the process did not take place and the sugar was irregularly diverted and unprocedurally released to the Kenyan market.
"The conditions relating to open and competitive enlisting of the distiller were breached and the applicable taxes were not paid," a notification by Head of Public Service Felix Koskei read in part.
Among those sacked are Kebs Managing Director Benard Njirani and other senior officials of the Kenya Bureau of Standards.
Njiraini is among top officials who were, Tuesday, grilled by police over the sale of condemned sugar worth more than Sh163 million.
Other Kebs officials suspended include Dr Geoffrey Muriira, Director Quality Assurance and Inspection, Hilda Keror, Manager Inspection, Mombasa Port Office, Liston Lagat, Assistant Manager, ICDN Nairobi, Rono Birgen Chief Manager, ICDN Nairobi, Stephen Owuor, Principal Officer and Peter Olima Joseph - Inspector, Mombasa.
Also suspended are Kenya Revenue Authority officials, Agricultural Food Authority (AFA) officials, DCI officers, and national police service officers among others.
KRA officials suspended are Joseph Kaguru, Mwanja Masinde, Stephen Muiruri, Moses Okoth, Doris Mutembei, Chacha Hondo, Carol Nyagechi and Derick Kago.
Police officers affected are George Mithamo and Joel Kirui while those from DCI are Bernard Ngumbi and Raphael Mwaka.
AFA officials affected are Oscar Kai and Patrick Magut.
Others are Joseph Malta Mweni (Port Health), Isacko Bonai (NEMA), Stephen Cheruiyot (Anti-Counterfeit Agency), Daniel Ngugi (KEPHIS), Willy Koskei (EACC) and Edwin Ruto (KPA).