Page 772 - SAIT Compendium 2016 Volume1

CASE DIGEST 2013–2014
had already found that there was no material non-disclosure by SARS and therefore suf cient evidence was before the judge to apply his mind. Accordingly no grounds existed to interfere with such decision. The court also con rmed SARS’ submission that they merely have to believe that a single offence or non-compliance event existed and did not have to show or believe that the applicants were multiple offenders or failed with numerous obligations in terms of a tax Act.
Abuse of the court’s process
The court found that though the business of forwarding and clearing agent falls within the ambit of the Customs and Excise Act, those same actions result in income tax and VAT obligations for the applicants. The court further noted that the applicants as agent could even under s 180 of the TAA incur liability on the VAT of the importer or exporter where they were held to have been negligent. The court further noted that though the alleged offences fall in periods preceding the TAA, s 270 of the TAA speci cally allowed the retrospective application of its provisions to offences occurring prior to the commencement of the TAA. The court rejected the submission by the applicants that SARS abused the court process by applying for the warrant as they were entitled to do so to administer the tax Acts. It also rejected the submission that SARS should have in the current instance distinguished between the TAA and Customs and Excise Act as it correctly solely relied on the TAA.
The court also rejected the applicant’s contention that SARS had to substantiate the other reasons mentioned in the af davit for the warrant on the basis that SARS was compelled to use the ex parte proceedings per s 59 (2) of the TAA and was, according to that process, not required to give notice to the applicants. SARS therefore did not need to give evidence as to why it used the ex parte proceedings. Lastly, the court also rejected the applicant’s contention that SARS abused the court process by targeting the applicant for other motives. The court found that the fact that the applicants felt targeted by SARS is no basis to reconsider the warrant as the motive is irrelevant. The court concluded that a bad motive does not render a warrant invalid just as a good motive does not render a non-compliant warrant valid.
The court dismissed the application on all grounds and awarded the cost of three counsel as used by SARS against the applicants.
17. Island View Storage (Pty) Ltd – HC 12262/2012 KZN (8 April 2014)
Introduction
This case considers whether rebate item 624.50 in Schedule 6 to the Customs and Excise Act 91 of 1964 (‘the Act’) is applicable to a taxpayer who had ethanol stolen from their storage facility, which was licenced by the South African Revenue Service (SARS) as a customs and excise warehouse in terms of ss. 19 and 21 of the Act.
Rebate item 624.50 in Schedule 6 to the Act provides for a rebate of duty where goods which are subject to excise duty are proven to have ‘been lost, destroyed or damaged, on any single occasion in the circumstances of viz major (ie an act of God) or in such other circumstances as the Commission(er) ... deems exceptional while such goods are ... in any customs and excise warehouse.’
The case alternatively considers whether the taxpayer is entitled to a s 76 (2) (d) refund.
This provision requires the Commissioner to consider any application for a refund from any applicant who contends that he has paid any duty or other charge (under the Act) for which he was not liable because the goods concerned were damaged, destroyed or irrecoverably lost by circumstances beyond his control prior to their release for home consumption.
Facts
Island View Storage (Pty) Ltd (IVS) conducts business as a third party liquid bulk storage facility within the port of Durban. The storage facilities are licensed by SARS as a customs and excise storage warehouse in accordance with the Act.
On 29 June 2009 IVS discovered a loss of 35 839 kg of ethanol from its warehouse. After conducting an investigation into the matter, it was discovered that the ethanol was stolen by certain individuals in collaboration with one of its employees. On 1 July 2009 IVS reported the theft to the police, who traced approximately 13 000 kg of the ethanol to a storage house in Pinetown. On 20 July 2009 the said ethanol was moved back to IVS’s premises. Theft of the ethanol was subsequently reported to SARS on 24 July 2009.
On 31 May 2010, SARS addressed a letter to the applicant demanding payment of R3,46 million in respect of excise duties in terms of s 20 (5) of the Act. This provision calls for the payment of excise duty to SARS where goods stored in a SARS designated customs and excise storage warehouse are subsequently removed from the warehouse. Section 20 (5) is, however, subject to any item in any Schedule to the Customs and Excise Act.
The dispute between SARS and IVS was over whether or not the stolen ethanol quali ed for rebate item 624.50 in Schedule 6 to the Act.
IVS’s alternative contention was that in the event the court deems the rebate to be inapplicable, the duty quali es for a refund in terms of s 76 (2) (d) of the Act.
SARS’ argument was that the Schedule 6 rebate was not applicable because while IVS had furnished a detailed chronological sequence of events leading up to the loss of the ethanol, they had failed to furnish the most crucial piece of information: the actual underlying cause of the loss incurred. Because of this, the Commissioner considered the loss to be mysterious and not to have occurred under exceptional circumstances.
According to IVS, an employee on duty the evening of the theft had fallen asleep while on duty. When later confronted by his superiors, he confessed to being a participant in the theft. A disciplinary enquiry was held and he was dismissed. IVS representatives presented a piece of paper to the court purporting to be a statement from the guilty employee where he admitted to the course of events as presented by IVS.
Held
The court did not look favourably upon the fact that no af davits were presented from the guilty employee or the colleagues to which he had supposedly confessed. After an analysis of all the evidence, it was held by Chili AJ at para 14 that:
764 SAIT CompendIum oF TAx LegISLATIon VoLume 1