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[2010] ZASCA 154
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Commissioner for South African Revenue Service v Saira Essa Productions (Pty) Ltd and Others (162/10) [2010] ZASCA 154; 73 SATC 202 (30 November 2010)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no
:
162/10
In the matter between:
THE COMMISSIONER FOR THE SOUTH
AFRICAN REVENUE SERVICE
.................................................................
Appellant
and
SAIRA ESSA PRODUCTIONS CC
...................................................
1
st
Respondent
SAIRA ESSA
....................................................................................
2
nd
Respondent
MARK CORLETT
..............................................................................
3
rd
Respondent
Neutral citation:
The Commissioner for the SA Revenue
Service v Saira Essa Productions CC (162/10)
[2010] ZASCA 154
(30
November 2010)
Coram:
HARMS DP, NUGENT, CLOETE, MAYA AND TSHIQI JJA
Heard: 17 November 2010
Delivered: 30 November 2010
Summary:
Small Business Tax Amnesty and Amendment of Taxation
Laws Act 9 of 2006
– whether the respondents were granted
amnesty from criminal prosecution – whether the regional court
should have interrupted
criminal proceedings pending a declaration
order by the high court.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
North Gauteng High Court, Pretoria (Potterill
AJ sitting as court of first instance):
1. The appeal is upheld with costs, including the costs of two
counsel.
2. The order of the court below is set aside and is substituted with
the following:
‘
1. The application is dismissed.
2. The applicants are ordered to pay the costs of the application on
an attorney and client scale, including the costs of two counsel,
jointly and severally.’
______________________________________________________________
JUDGMENT
______________________________________________________________
TSHIQI JA (Harms DP, Nugent, Cloete and Maya JJA concurring):
[1] This is an appeal against an order in terms of which the North
Gauteng High Court, Pretoria (Potterill AJ) declared that the
respondents had duly complied with their obligations under the Small
Business Tax Amnesty and Amendment of Taxation Laws Act No
9 of 2006
(‘the Act’) and were accordingly exempt from prosecution
on charges pending against them in the regional
court, Germiston. The
application was launched after the criminal proceedings were
postponed, by agreement, to enable the respondents
to approach the
high court for a declaratory order on whether the respondents
qualified for amnesty against prosecution with regard
to the pending
criminal charges. The appeal is brought with leave of the court
below.
[2] The Act came into operation on 25 July 2006. The purpose of the
Act was to encourage small businesses which were not registered
for
tax and those which were registered, but where business income for
the years preceding the 2006 year of assessment had not
been declared
or was understated or outstanding, to declare their income and apply
for amnesty. In terms of s 8(c), taxpayers were
entitled to relief
for payment of any VAT in terms of the VAT Act in respect of (inter
alia) any supply of services during the
‘qualifying periods’
ie up to 28 February 2006. The relief was, however, subject to
certain exclusions in terms of
ss 5(2) and 10(a) of the Act which
provide as follows:
‘
5(2)
The Commissioner may not, subject to subsection (4), approve an
application in terms of subsection (1) if the Commissioner,
at any
time before the submission of the application for tax amnesty,
delivered a notice to that applicant or that applicant's
representative informing that applicant of an audit, investigation or
other enforcement action relating to any failure by
that
applicant to comply with any Act in respect of which application for
tax amnesty is made.’
(Subsection 5(4) is irrelevant for present purposes.)
‘
10 The
tax amnesty relief does not apply in respect of any amount of tax,
levy, contribution, interest, penalty or additional tax,
to the
extent that it –
(a) had already been paid before
the submission of the application…’
[3] In terms of s 5 of the Second Small Business Tax Amnesty and
Amendment of Taxation Laws Act 10 of 2006 (Second Amnesty Act),
an
applicant whose application for amnesty has been approved in terms of
s 5 is deemed not to have committed an offence in terms
of any Act to
which the amnesty Act relates. Consequently such a person would not
be liable for criminal prosecution.
[4] Two pertinent issues arise in this appeal. The first is a
jurisdictional issue and it is whether the criminal proceedings in
the regional court should have been suspended pending the
determination of the question of law by the high court. The second
pertains
to the merits of the order granted by the court below. I
shall deal with the second question first.
[5] The second respondent (Ms Essa) and third respondent (Mr Corlett)
are husband and wife and joint members of the first respondent,
Saira
Essa Productions CC (‘the CC’). Ms Essa is an actress and
producer and uses the CC as a vehicle to carry on business,
the bulk
of which comprises of services rendered to the South African
Broadcasting Corporation.
[6] In July 2003, SARS commenced with criminal investigations against
the respondents for non-payment of PAYE, under-declaration
of VAT and
non-filing of tax returns for the 2003/2004 tax years. On 11 August
2004, the respondents were duly notified about the
investigations and
were afforded an opportunity to liaise further with SARS with a view
to submitting all outstanding returns and
for a discussion of
possible criminal charges arising out of the investigations. In
response to this letter, the respondents submitted
the relevant tax
returns. They subsequently between August 2004 and September 2005
paid the monies due to SARS for VAT and also
paid admission of guilt
fines in respect of PAYE. SARS proceeded with criminal charges with
regard to the VAT. It is these charges
which formed the subject
matter of the application in the court below.
[7] From 12 September 2005, the respondents made at least seven
appearances in the regional court, Germiston, before the proceedings
were postponed pending the application before the high court. The
magistrate agreed to postpone the criminal proceedings because
the
Act had in the meantime come into operation on 25 July 2006. The
respondents’ legal representative referred the magistrate
to
the Act. The magistrate indicated
that it was not clear to him whether the respondents could
rely on the Act to escape prosecution. He agreed to postpone the
criminal
proceedings to enable the respondents to bring an
application to the high court for a declaratory order to clarify the
legal implications
of the Act. The application was issued on 20
February 2008.
[8] When the issue of the amnesty was raised with the magistrate, and
when the application for a declaratory order was made in
the high
court, SARS had already communicated its stance on the issue of the
amnesty for the VAT to the respondents in writing.
The sequence of
the correspondence between SARS and the respondents was as follows:
On 27 October 2006, Ms Essa and Mr Corlett
submitted individual
applications, and one on behalf of the CC, for amnesty to SARS in
terms of the Act, inter alia in respect
of income tax and VAT. It
seems that on 10 January 2007, the respondents communicated with
SARS, because on 26 January 2007, SARS
addressed a letter to their
attorney in reply to a letter from him dated 10 January 2007. In that
letter the respondents were informed
unambiguously that the summons
in the criminal prosecution dealt with amounts that were excluded
from amnesty. A further letter
dated 12 March 2007 from SARS to the
respondents’ attorneys re-stated SARS’ position in this
regard.
[9] SARS responded to all three applications for amnesty. It is on
the three responses which the respondents place reliance for
their
immunity from prosecution. All three responses are contained in a pro
forma amnesty approval form, and are addressed to the
individual
respondents. They all state that: ‘In terms of the Small
Business Tax Amnesty Legislation, you are hereby advised
that your
application has been approved subject to receipt of full payment of
the amnesty levy.’ All the approvals contain
the individual
income tax numbers of the respondents and state that the assessment
information was for ‘2006 Taxable Business
Income’. What
is glaringly absent in all three approvals is any reference to VAT
and in the case of the CC, the VAT reference
number of the CC.
Counsel for the respondents sought to place reliance on the single
sentence quoted above as constituting approval
of the applications
for VAT amnesty. It patently was not – both because of the
terms of the responses themselves to which
I have just referred, and
because of the letters quoted in the previous paragraph of this
judgment which preceded the responses.
The court a quo erred in
finding that, as a fact, amnesty had been granted in respect of VAT.
[10] In terms of the provisions of s 5(2), SARS was precluded from
approving an application for amnesty in circumstances like the
present, where a notice of investigation had been issued ‘relating
to any failure to comply with a tax related Act in respect
of which
the application for amnesty is made’, and SARS was further
precluded from doing so because of the terms of the provisions
of s
10(a), inasmuch as the VAT had been paid before the application for
amnesty had been submitted. The provisions of the Act
are clear and
unambiguous. It is not clear why the magistrate felt the need to
refer this issue to the high court.
[11]
The
jurisdictional issue:
This court has on several occasions discouraged
the practice of interrupting criminal proceedings in magistrates’
courts for
the purpose of clarifying a question of law in the high
court and has cautioned courts on the consequences of such a
practice.
The most recent reported judgment is
National
Director of Public Prosecutions v King
1
where Harms DP said at 152b-c:
‘
The
fair trial right does not mean a predilection for technical niceties
and ingenious legal stratagems, or to encourage preliminary
litigation – a pervasive feature of white collar crime cases in
this country. To the contrary: courts should within the confines
of
fairness actively discourage preliminary litigation.’
The undesirable consequence which arose in this
matter was that the order of the high court amounted to an acquittal
of the respondents
(accused in a pending criminal matter) by a civil
court on a basis which was not supported by the evidence, and which
was incompetent
in law.
[12]
Section 319
of the
Criminal Procedure Act 51
of 1977
provides for a systematic manner in which a superior court
may reserve questions of law for consideration by this court.
2
[13] So far as proceedings in magistrates’
courts are concerned, in
Wahlhaus v
Additional Magistrate, Johannesburg
3
Nicholas JA stated:
‘
It is
true that, by virtue of its inherent power to restrain illegalities
in inferior courts, the Supreme Court may, in a proper
case, grant
relief – by way of review, interdict, or
mandamus
-
against
the decision of a magistrate's court given before conviction. (See
Ellis
v Visser and Another
,
1956
(2) SA 117 (W)
, and
R
v Marais
,
1959
(1) SA 98
(T)
, where most of the decisions are collated). This,
however, is a power which is to be sparingly exercised. It is
impracticable to
attempt any precise definition of the ambit of this
power; for each case must depend upon its own circumstances. The
learned authors
of
Gardiner
and Lansdown
(6th
ed., vol. I p. 750) state:
“
While
a superior court having jurisdiction in review or appeal will be slow
to exercise any power, whether by
mandamus
or
otherwise, upon the unterminated course of proceedings in a court
below, it certainly has the power to do so, and will do so
in rare
cases where grave injustice might otherwise result or where justice
might not by other means be attained. . . . In general,
however, it
will hesitate to intervene, especially having regard to the effect of
such a procedure upon the continuity of proceedings
in the court
below, and to the fact that redress by means of review or appeal will
ordinarily be available.”
In my judgment, that statement
correctly reflects the position in relation to unconcluded criminal
proceedings in the magistrates'
courts. I would merely add two
observations. The first is that, while the attitude of the
Attorney-General is obviously a material
element, his consent does
not relieve the Superior Court from the necessity of deciding whether
or not the particular case is an
appropriate one for intervention.
Secondly, the prejudice, inherent in an accused's being obliged to
proceed to trial, and possible
conviction, in a magistrate's court
before he is accorded an opportunity of testing in the Supreme Court
the correctness of the
magistrate's decision overruling a
preliminary, and perhaps fundamental, contention raised by the
accused, does not
per se
necessarily justify the Supreme Court
in granting relief before conviction (see too the observation of
MURRAY, J., at pp. 123 -
4 of
Ellis'
case,
supra)
. As
indicated earlier, each case falls to be decided on its own facts and
with due regard to the salutary general rule that appeals
are not
entertained piecemeal.’
One of the fundamental considerations for not
reserving questions of law until the criminal proceedings have been
finalised, is
that the question would be academic if no conviction
follows at the end of the trial:
R v
Adams & others
.
4
In the present matter, since there was no question
of illegality in the regional court, the high court could not
exercise its inherent
power to ‘review’ by way of
declaratory order.
[14] SARS had asked in its answering affidavit for a punitive costs
order. Counsel for the respondents could not offer any basis
on which
such an order would not be appropriate in the circumstances and it
clearly is. As stated, the proceedings in the regional
court should
not have been interrupted. The only inference is that the request to
suspend the criminal proceedings was aimed at
delaying them still
further. This is the only inference, because apart from the fact that
there was no basis for this, the position
with regard to VAT had been
made patently clear by SARS in their two letters in January and March
2007, even before the letters
of approval were sent to the
respondents. The omission of any reference to VAT in the letters of
approval merely confirmed the
stance of SARS. In the circumstances
the application to the high court was vexatious and this is ample
justification for a punitive
costs order against the respondents.
[15] The following order is made:
1. The appeal is upheld with costs, including the costs of two
counsel.
2. The order of the court below is set aside and is substituted with
the following:
‘
1. The application is dismissed.
2. The applicants are ordered to pay the costs of the application on
an attorney and client scale, including the costs of two counsel,
jointly and severally.’
______________________
Z L L Tshiqi
Judge of Appeal
APPEARANCES
APPELLANT: J J GAUNTLETT SC (with him H G A SNYMAN)
Instructed by Mketsu & Associates Inc Pretoria; Matsepes Inc,
Bloemfontein.
RESPONDENTS: A E BHAM SC
Instructed by Garlicke & Bousfield Inc
Pretoria;
Webbers, Bloemfontein.
1
2010
(2) SACR 146 (SCA).
2
Section
319
provides:
‘
(1) If any question
of law arises on the trial in a superior court of any person for any
offence, that court may of its own motion
or at the request either
of the prosecutor or the accused reserve that question for the
consideration of the Appellate Division,
and thereupon the
first-mentioned court shall state the question reserved and shall
direct that it be specially entered in the
record and that a copy
thereof be transmitted to the registrar of the Appellate Division.
(2) The grounds upon which any objection to an
indictment is taken shall, for the purposes of this section, be
deemed to be questions
of law.
(3) The provisions of
sections 317(2)
, (4) and (5) and
318
(2) shall apply
mutatis mutandis
with
reference to all proceedings under this section.’
See
also ss 317 and 318 of the Criminal Procedure Act.
3
1959
(3) SA 113
(A) at 119H; 120A-E.
4
1959
(3) SA 753
(A) at 761.