Page 771 - SAIT Compendium 2016 Volume1

CASE DIGEST 2013–2014
decision. This principle of bona des also applied to SARS in proceedings brought ex parte as prescribed by s 59 (2) of the TAA and the court would be entitled to reconsider the warrant if material facts were withheld, irrespective of whether it was wilful or not. As to what is material, the court held that the person applying would have to make a judgement call as to which facts would in uence the judicial of cer in reaching his or her decision. However, the test for materiality should not be set so high as to make it practically impossible for the state to comply with its disclosure obligation.
The applicants aver that SARS provided irrelevant or vexatious facts and withheld material facts to mislead the judicial of cer which included that:
• SARS’ reference to the 1st applicant’s previous murder allegation was vexatious;
• the reliance on vague media reports of the involvement of the applicants in respect of unrelated matters is inappropriate; • the reference to the criminal charges on customs matters was incorrect as the charges had been withdrawn;
• SARS misled the court by cloaking the 3rd applicant’s business as an import and export business when it was according
to SARS’ full knowledge a clearing and forwarding agent;
• SARS failed to disclose that the applicant’s tax affairs were by and large up to date; and
• SARS failed to distinguish between the TAA and Customs Act in their application though they knew that the 3rd
applicant’s activities fell within the latter Act.
SARS submitted that some of the information such as the previous conviction and media reports were only used as introduction and background information and not to support the application. The matter of the 3rd applicant’s activities was according to SARS dealt with as it was noted that he conducted both import and export activities as well as those of a clearing and forwarding agent. In respect of the criminal charges SARS submitted that when they applied for the warrant they were not aware that those charges had been withdrawn and this was a mere oversight.
Jurisdictional facts required by the Tax Administration Act (TAA)
The applicants alleged that the allegations made by SARS to secure the warrant were not reasonable grounds as required by s 60 of the TAA as no proof was submitted of the alleged offences and the facts presented to the judicial of cer were misleading to such extent that he could not apply his mind properly.
Abuse of the court’s process
The applicants alleged that SARS abused the court process by clothing the application under the guise of income tax and VAT offences so that they could use the TAA whereas it was actually matters that should be dealt with under the Customs and Excise Act 91 of 1964. They submitted that the alleged offences under consideration for which the warrant was granted were under the exclusive jurisdiction of the Customs and Excise Act, which s 4 of the TAA speci cally excludes from its ambit and therefore a warrant should have been sought under the provisions of the Customs and Excise Act.
SARS conceded that customs transgressions did not fall within the ambit of the current proceedings but that the applicants were also subject to the Income Tax Act and VAT Act, which did fall within the ambit of the TAA and the warrant was sought in respect of offences that SARS believed occurred in terms of those Acts.
Held
Requirement of bona des for ex parte applications
The court accepted SARS’ explanation of the introductory and background information and noted that the applicants had themselves used similar introductory statements. It also accepted SARS’ explanation of the criminal charges and concluded that this fact alone would not have misled the judge. In respect of the exclusion of the applicant’s compliance status, the court held that this was misguided as it was not the submission of the returns but its contents which was suspect. Lastly, the court also rejected the applicant’s submission that SARS had to make a distinction between the application of the two Acts to the judge as it was solely relying on the provisions of the TAA for the matter at hand.
b. Jurisdictional facts required by the Tax Administration Act (TAA)
The court stated that when the validity of a warrant is considered it must rst determine whether the jurisdictional facts have been determined and secondly if the discretion was exercised judicially. In respect of the rst matter a judge, before issuing the warrant, must be satis ed that there are reasonable grounds to believe that a person failed to comply with an obligation imposed under a tax Act or that such person committed a tax offence and furthermore that there were reasonable grounds to believe that relevant material would be found on the premises speci ed as evidence in respect of the failure or offence.
The court held that the SARS af davits suf ciently set out what the suspected offences or failures to comply were and that the grounds on which SARS based its reasonable belief was also set out in the founding af davit. The court rejected the applicant’s submission that reasonable grounds require prima facie proof of the non-compliance or offences as the innocence or guilt of the applicant is not an issue in such a case. The court held that the TAA merely requires a suspicion that the offences have been committed and that reasonable grounds exist for the granting of the warrant. The requirement is therefore merely that there is an objective set of facts which caused the judicial of cer to have the required belief which belief was established from the total picture presented by SARS in the warrant application. The court further found that SARS is not obligated to make the judicial of cer aware of less intrusive measures to retrieve the information as it is the duty of the judicial of cer hearing the matter to decide whether the warrant sought by SARS would be reasonable in the circumstances. SARS merely needs to place the objective facts before the court to make the determination. The court concluded that the jurisdictional facts were therefore determined and that no material non- disclosure occurred by SARS.
As to the applicant’s submission that the judge did not apply his mind to the facts presented by SARS, the court con rmed that s 60 of the TAA provides a discretion to a judge to issue a warrant once the jurisdictional facts have been determined. The court further con rmed the principle that it may interfere with the decision of a judge where he or she did not apply his or her mind as alleged by the applicant. However, the court rejected the applicant’s submission on the basis that it
SAIT CompendIum oF TAx LegISLATIon VoLume 1 763
CASE DIGEST 2013-2014