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[2014] ZASCA 223
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Director of Public Prosecutions, Western Cape v Parker (103/2014) [2014] ZASCA 223; 2015 (4) SA 28 (SCA); [2015] 1 All SA 525 (SCA); 2015 (2) SACR 109 (SCA); 77 SATC 224 (12 December 2014)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
CASE
NO: 103/2014
Reportable
In
the matter between:
DIRECTOR
OF PUBLIC PROSECUTIONS,
WESTERN
CAPE
..............................................................................................................
APPELLANT
and
MOHAMED SHAKIEL
PARKER
................................................................................
RESPONDENT
Neutral
citation:
Director of Public
Prosecutions, Western Cape v Parker
(103/14)
[2014] ZASCA 223
(12 December 2014).
Coram:
Brand, Shongwe, Leach, Pillay et Willis JJA
Heard:
21 November 2014
Delivered:
12 December 2014
Summary:
Criminal law – failure to pay
value-added tax in terms of Value-Added Tax Act 89 of 1991 –
charged with common law theft
– whether relationship between
registered vendor and South African Revenue Service is a trustee
relationship.
ORDER
On
appeal from:
Western Cape High Court,
Cape Town (Dlodlo J and Van Staden AJ sitting as court of appeal):
The
appeal is dismissed with costs, including the costs occasioned by the
employment of two counsel.
JUDGMENT
Pillay
JA
(Brand, Shongwe, Leach et Willis
concurring):
[1]
Step-in-Time Supermarket CC (the CC), a registered Value-Added Tax
(VAT) vendor and the respondent, its sole representative
were charged
in the regional court, Belville, Western Cape with a number of counts
under the Income Tax Act 58 of 1962 (the Income
Tax Act) and the
Value-Added Tax Act 89 of 1991 (the Act) respectively. Apart from
these they were charged with sixteen counts
of (common law) theft of
money allegedly collected in respect of VAT. The charges under the
Act related to the CC’s failure
to submit VAT returns under
s 28(1)(
a
)
of the Act between the period February 2001 to February 2006, while
the theft charges were based on the CC’s failure to
pay VAT
over the same period. The charge sheet alleged, however, that all
sixteen crimes of theft were committed on 23 October
2006, that being
the date upon which the VAT returns for the CC were eventually filed.
[2]
The CC and the respondent pleaded guilty to all the charges and were
duly convicted after the respondent submitted a written
plea in terms
of s 112 of the Criminal Procedure Act 51 of 1977 (the CPA) on behalf
of both. The magistrate for purposes of sentence
grouped the
convictions and sentenced the respondent as follows:
(a) On counts 1 to 6
(ie the charges under the Income Tax Act) : A fine of R 3000 or 18
months’ imprisonment suspended for
four years on condition that
he is not convicted of contravening s 75(1)
(a)
of the Income
Tax Act, committed during the period of suspension;
(b) On counts 7 to
37 (ie the charges under the Act): A fine of R 10 000 or 2
years’ imprisonment suspended for four
years on condition that
he is not convicted of contravening s 58(
d
) of the Act,
committed during the period of suspension;
(c) On counts 44 to
60 (ie the sixteen charges of common law theft): 5 years’
imprisonment in terms of
s 276(1)
(i)
of the
Criminal Procedure
Act.
Since
the CC did not appeal, it is not necessary to set out the sentences
imposed on it.
[3]
The trial court granted the respondent leave to appeal against the
sentence imposed in respect of the theft, ie 5 years’
imprisonment in terms of
s 276(1)
(i)
of the CPA, to the
Western Cape High Court, Cape Town. Prior to the scheduled hearing of
the appeal, both the appellant and respondent
were, however,
requested by the court below to prepare and argue the following:
‘
1.
Should the appellant have been charged with theft (counts 44 to 66)
in view of the judgment in
AJC Olivier v
Die Staat
. [ie
AJC
Olivier v Die Staat
(A153/2005)(22
September 2006).]
2. On what basis can
the matter under consideration be distinguished from that matter.
3. Was the said
unreported judgment of Olivier disclosed to the legal representatives
of the appellant prior to the pleas in terms
of
Section 112
of the
Criminal Procedure Act?
4. Does
this court
have the inherent jurisdiction to set aside this conviction, based on
the authority of Olivier’s case.’
In
consequence, the respondent, as appellant, successfully applied to
the regional court for leave to appeal against the convictions
for
theft. It is common cause that the respondent, representing the CC,
did not pay VAT to the South African Revenue Service (SARS).
[4]
The court below (per Dlodlo J and Van Staden AJ), held that the
respondent did not commit theft of the VAT, essentially on the
basis
that the money in question belonged to the vendor and not the
commissioner of SARS. The convictions for theft (counts 44
to 60)
were consequently set aside together with the sentence in terms of
s 276(1)
(i)
of the CPA. The court below also referred to other aspects in its
judgment but it is not necessary to deal with those herein.
[5]
The appellant (the State) requested this court to decide the
following legal question:
‘
Whether
a VAT vendor who has misappropriated an amount of VAT which it has
collected on behalf of SARS can be charged, with the
common law crime
of theft.’
At
the hearing before us counsel for the State was asked about the
underlying reason for the appeal. The motivation for the question
arose from the fact that a failure to pay VAT is a statutory crime
under
s 28(1)(
b
) read with s 58 of the Act which is
punishable with a sentence of two years’ imprisonment. Counsel
for the State then
explained that the reason why it approached the
court was because the penalty and punishment prescribed by the Act
were too lenient
for certain cases of misappropriation of VAT. It
follows that a conviction for theft would pave the way for sterner
sanctions and
that is what the prosecuting authority sought.
[6]
In contending that the court below had erred in answering the
question stated in the negative, the State argued that the court
started out on the wrong premise by asking whether SARS became the
owner of that money. In collecting VAT, so the State’s
argument
went, the VAT vendor acts as an agent for SARS. It follows, so the
argument proceeded, that a VAT vendor who uses VAT
for purposes other
than to pay to the Commissioner misappropriates those funds and is
therefore guilty of theft, despite the fact
that the vendor may be
the owner of that money.
[7]
In support of this contention, the State sought to rely on those
decisions of this court which provide authority for the following
propositions: Where X holds money in trust on Y’s behalf or
receives money from Y with instructions that it be used for a
specific purpose and X misappropriates that money by using it for a
different purpose, X commits theft of the money. In these types
of
cases the rule that one cannot steal one’s own money is no bar
to a conviction. Y, according to these decisions, has a
special
interest or property in the money. However, unless X is obliged to
keep the money in a separate account, he does not commit
theft if, at
the time he uses the money for a different purpose, he has at his
disposal a liquid fund large enough to enable him
to repay it (see eg
S v Gathercole
1964 (1) SA 21
(A) at 25;
S v Visagie
[1990] ZASCA 124
;
1991 (1) SA 177
(A) at 182-183;
S
v Boesak
[2000] ZASCA 112
;
2000 (1) SACR 633
(SCA) paras
96 and 99).
[8]
In support of the proposition that the VAT vendor who collected VAT
is in a position of trust
vis-à-vis
SARS with regard to
that money, the State sought to rely on the following:
(a) The provisions
of s 7(1) of the Act which reads:
‘
Imposition
of value-added tax
(1) Subject to the
exemptions, exceptions, deductions and adjustments provided for in
this Act, there shall be levied and paid for
the benefit of the
National Revenue Fund a tax, to be known as the value-added tax –
(
a
) On the
supply by any vendor of goods or services supplied by him on or after
the commencement date in the course or furtherance
of any enterprise
carried on by him;
(
b
) . . .
(
c
) . . .
calculated at the
rate of 14 per cent on the value of the supply concerned or the
importation . . .’
(b) The statements
in
Metcash Trading Ltd v Commissioner, South African Revenue
Service
2001 (1) SA 1109
(CC) paras 15 and 17 that ‘vendors
are entrusted with a number of important duties in relation to
VAT’ and that
‘vendors are in a sense involuntary
tax-collectors’.
(c)
The decision of this court in
Estate
Agency Affairs Board v McLaggan
2005
(4) SA 531
(SCA).
[9]
I do not believe, however, that s 7(1) of the Act either
expressly or impliedly creates a relationship of trust. On the
contrary, it is clear to me that the relationship created by the Act
is one of a debtor and his creditor. At the time the respondent
was
charged, s 40 of the Act was still in operation. That section
pertinently described VAT ‘when it becomes due or
is payable’
as a ‘debit to the State’. In addition the section
provided for SARS to civilly sue a vendor for
outstanding VAT
together with the 10 per cent penalty (and interest) provided for in
s 39. Section 40 has since been repealed by
the Tax Administration
Act 28 of 2011 (the 2011 Act) which similarly makes provision for
SARS to recover money due to it by way
of litigation (see chapters 11
and 12 of the
Tax Administration Act). Consequently
it is clear that
the Act provides for a debtor-creditor relationship as between the
vendor and SARS. The procedures allow the commissioner
to resort to
litigation in order to recover tax debts (s 169 of the 2011 Act)
and even institute sequestration, liquidation
or winding-up
proceedings, as the case may be (s 177 of the 2011 Act).
Therefore should a vendor fail to pay any tax, penalty
or interest,
(when it is due and payable) the commissioner is entitled to sue the
vendor for payment. The vendor can also, simultaneously,
be charged
in terms of s 58 of the Act for failing to comply with the Act.
Significantly, the offences referred to in s 58 are
confined to
non-compliance with the Act and do not include common law theft.
[10]
The argument based on
Metcash
misconstrued and quotes out of context the comments made by Kriegler
J. What Kriegler J said in para 15, after broadly discussing
what the
Act compels the registered vendor to do in calculating and paying
VAT, was that ‘In the result vendors are entrusted
with a
number of important duties in relation to VAT’. In this sense
‘entrusted’ might very well be replaced
with ‘burdened
with’. In other words the vendor is expected to comply with
various sections of the Act which serve
to safeguard the operation
thereof and minimise the effects of its weaknesses. The learned judge
certainly did not suggest that
a trust relationship or one resembling
that as between a trustee and a beneficiary of a trust, had been
created. Second, counsel
for the appellant misconceives the import of
the
Metcash
decision in citing the judgment as authority for the proposition that
VAT vendors are involuntary tax-collectors on behalf of SARS,
and are
therefore in a position of trust and would commit theft if they
appropriate such collected VAT for uses other than to submit
it to
SARS. What the learned judge in fact said at para 17 is ‘that
vendors are in a sense involuntary tax-collectors’.
The
omission to consider the phrase ‘in a sense’ has far
reaching consequences which give a totally different meaning
to what
the learned judge intended. It is clear that he did not classify VAT
vendors as official tax-collectors but explained that
‘in a
sense’ they could be described in this way. All the learned
judge was conveying is that VAT is payable on every
sale and that
details of the manner of calculation of VAT, the timetable for
periodic payment and the amount to be paid are statutorily
controlled
and it is left for the vendor to ensure compliance therewith. This is
quite different from imposing the status of a
formal tax-collector or
a trustee of SARS on a registered vendor.
[11]
The State’s reliance upon
Estate
Agency Affairs Board v McLaggan
was
also wrong. This case related to the cancellation of McLaggan’s
fidelity fund certificate. The element of dishonesty
was of
importance on appeal not to determine whether or not he was guilty of
theft, but rather to determine whether McLaggan’s
fidelity fund
certificate should indeed lapse by reason of dishonesty. And,
importantly, he was in fact charged in terms of s 58
of the Act
regarding the non-payment of VAT and not with common law theft. The
submission made by the State on the strength of
this case that the
respondent’s misappropriation of VAT was seen as dishonest and
therefore it amounted to theft, is clearly
misplaced.
[12]
During argument counsel for the State had difficulty in indicating
when exactly the vendor should be regarded as having misappropriated
the money which had been collected as VAT. At one stage she contended
that it was on the 25
th
day of the month following that period, when the net amount of VAT
becomes due and payable in terms of s 28(1)(
b
)
of the Act. But that only tells us when the vendor’s liability
arises. At that stage the vendor’s position would be
no
different from eg the tax payer whose assessment for income tax had
been made (see eg
Metcash
para
16). Even counsel for the State baulked at the suggestion that this
taxpayer would be guilty of theft if it uses the assessed
amount for
a purpose other than to pay its assessed income tax. This proposition
is clearly in line with the allegation in the
charge sheet that the
respondent had committed theft in respect of the net amounts that
were reflected in the VAT returns of the
CC which were eventually
filed on 23 October 2006. But this contention raised problems of its
own. First, it would mean that the
vendor who files a return steals
from SARS while one who does not will not be guilty of theft.
Secondly, since VAT is calculated
on an invoice basis it could mean
that the vendor had stolen VAT which it had not yet received.
[13]
Confronted with these difficulties, counsel for the State then
changed tack by suggesting that the relationship of trust arises
every time the vendor collects VAT and uses that money for purposes
other than paying it over to SARS. This proposition again created
problems of its own as is shown by the following example. If the
vendor sells an article for R100 together with R14 VAT it would,
on
counsel’s argument, be guilty of theft of the R14 if it uses it
for another purpose, unless it has a liquid fund to enable
him to
repay. The fact that on the next day his indebtedness is cancelled
out by input tax would make no difference. Neither would
the fact
that it would be able to pay whatever VAT becomes payable on the 25
th
day of the month following the tax period.
[14]
In the light of this example, the concept of a trust relationship
between the vendor and SARS which forms the bedrock of the
State’s
argument is clearly unsustainable. The answer to these difficulties
suggested by counsel, namely that the Director
of Public Prosecutions
would never charge the vendor under the circumstances contemplated in
the example, provides no answer at
all to the question whether a
crime has been committed. The law cannot depend on whether or not the
DPP decides to enforce it.
[15]
It is clear that the Act is a scheme with its own directives,
processes and penalties. The relationship it creates between
SARS and
the registered vendor is sui generis – one with its own
peculiar nature. The Act does not confer on the vendor the
status of
a trustee or an agent of SARS. If it did, the vendor would either
have to keep separate books of account or alternatively,
would have
to be sufficiently liquid at any given time in order to cover the
outstanding VAT. The Act makes no provision for this
situation nor
does it seek to compel a vendor to keep separate books of account in
respect of VAT.
[16]
To find that the Act creates a trust relationship (in whatever form)
would require an innovative approach. The Act, in particular
s 58,
does not incorporate theft as an offence. If the State wants the
legislature to do so, or if the sentences provided
for in s 58
are found to be inadequate, the obvious solution is to approach the
Legislature. For the courts to extend the
crime of theft to resolve
the State’s difficulties, would be contrary to the principle of
nullum crimen, nulla poena sine praevia
lege poenali
(without a law, no charge
is possible).
[17]
For these reasons the question of law as formulated by the State must
therefore be answered in the negative. In the event the
appeal
against the judgment of the court a quo must fail. This brings me to
the question of costs.
Section 311(2)
of the
Criminal Procedure Act
provides
that, in dismissing an appeal of this kind, the court may
order the State to pay the costs which the respondent may have
incurred
in opposing the appeal. The respondent in this matter had a
clear interest in the outcome of the appeal. Moreover, I believe that
in all the circumstances a costs order which includes the costs of
two counsel, is justified.
[18]
Accordingly, the appeal is dismissed with costs, including the costs
occasioned by the employment of two counsel.
_________________
R
PILLAY
JUDGE
OF APPEAL
APPEARANCES:
FOR
APPELLANT: Adv B Hendry-Sidaki
Instructed
by:
Director
of Public Prosecutions, Cape Town
Director
of Public Prosecutions, Bloemfontein
FOR
RESPONDENT: Adv M Salie with Adv S Gcelu
Instructed
by:
Parker
Attorneys and Conveyancers, Cape Town
Phatshoane
Henney Attorneys, Bloemfontein