CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 60/21
In the matter between:
BARNARD LABUSCHAGNE INCORPORATED Applicant
and
SOUTH AFRICAN REVENUE SERVICE First Respondent
MINISTER OF FINANCE Second Respondent
Neutral citation: Barnard Labuschagne Incorporated v South African Revenue
Service and Another [2022] ZACC 8
Coram: Madlanga J, Madondo AJ, Majiedt J, Mhlantla J, Pillay AJ,
Rogers AJ, Theron J, Tlaletsi AJ and Tshiqi J
Judgments: Rogers AJ (unanimous)
Decided on: 11 March 2022
Summary: Tax Administration Act 28 of 2011 — sections 172 and 174
— certified statement filed by South African Revenue Service to
be treated as civil judgment — whether susceptible of rescission
Scope of Chapter 9 of Tax Administration Act — whether dispute
about alleged payment of self-assessments within scope
2
ORDER
On appeal from the High Court of South Africa, Western Cape Division, Cape Town:
1. Leave to appeal is granted.
2. The appeal is upheld.
3. The order of the High Court is set aside.
4. The applicant’s application for rescission is remitted to the High Court
for hearing before a different Judge in order to determine the merits of the
application.
5. The costs incurred to date in the High Court stand over for determination
in the remitted proceedings.
6. The respondents must pay the applicant’s costs in the applications to the
High Court and Supreme Court of Appeal for leave to appeal.
7. The respondents must pay the applicant’s costs in this Court.
JUDGMENT
ROGERS AJ (Madlanga J, Madondo AJ, Majiedt J, Mhlantla J, Pillay AJ, Theron J,
Tlaletsi AJ and Tshiqi J concurring):
Introduction
[1] Judgment in this case, which the Court is deciding without an oral hearing, was
initially delivered on 4 March 2022. Shortly after delivery, the judgment was rescinded
by the Court of its own accord when it emerged that the first respondent , the South
African Revenue Service (SARS), had filed written submissions of which the Court was
unaware. The judgment which follows takes account of all the written submissions.
ROGERS AJ
3
[2] The applicant, Barnard Labuschagne Incorporated (BLI), is an incorporated firm
of attorneys. On 15 Decembe r 2017 SARS filed with the Registrar of the High Court
of South Africa, Western Cape Division, Cape Town (High Court), a certified statement
in terms of section 172(1) of the Tax Administration Act 1 (TAA) recording that BLI
owed SARS R804 747. In terms of section 174 of the TAA, a certified statement so
filed “must be treated as a civil judgment lawfully given in the relevant court in favour
of SARS for a liquid debt for the amount specified in the statement”. For convenience,
I call this a “tax judgment”.
[3] BLI brought an application to rescind the tax judgment. SARS’s main ground
of opposition was that a tax judgment is not susceptible of rescission. In response, BLI
contended that if a tax judgm ent is not susceptible of rescission, sections 172 and 174
of the TAA are constitutionally invalid (the alternative constitutional challenge). In
view of this contention, the Minister of Finance (Minister) was joined as a second
respondent.
[4] The certified statement arose from BLI’s self -assessments for value -added tax,
employees’ tax, unemployment insurance fund contributions and skills development
levies. BLI’s attack on the tax judgment was not that its self -assessments were wrong.
Its complaint was th at the certified statement was wrong because BLI had made
payments which SARS had failed to appropriate to the relevant assessed taxes.
[5] The High Court held that the tax judgment against BLI was not susceptible of
rescission and dismissed the alternative c onstitutional challenge. The applicant was
ordered to pay the costs of the application. The High Court refused an application for
leave to appeal with costs, as did the Supreme Court of Appeal. BLI now seeks leave
1 28 of 2011.
ROGERS AJ
4
from this Court. The parties were asked to file written submissions on the issues
discussed below.2
Jurisdiction
[6] BLI’s application, on the question of rescindability, raises an arguable point of
law of general public importance. This is because several recent High Court judgments,
of which t he High Court’s judgment in the present matter is the third, appear to have
failed to apply binding precedent, a core component of the rule of law, which is a
founding value of our Constitution. 3 This is an issue which this Court must redress.
We thus have jurisdiction.
Rescindability of tax judgments
The TAA
[7] Section 172(1) of the TAA provides that if a person has an “outstanding
tax debt”, SARS may, after giving the person at least 10 business days’ notice, “file
with the clerk or registrar of a compet ent court a certified statement setting out the
amount of tax payable and certified by SARS as correct”. Section 172(2) provides that
such a statement may be filed even though the tax debt is subject to an objection or
2 The directions required written submissions on the following issues:
“(a) Is a certified statement filed with a court in terms of section 172 read with section 174
of the [TAA] in principle susceptible of rescission? [The parties were referred to various
authorities which had to be addressed in the submissions.]
(b) If this Court were to hold that a certified statement is in principle sus ceptible of
rescission, was the applicant’s attack on the certified statement in its rescission
application, i.e. an attack that the certified statement disregarded payments allegedly
made in respect of the self -assessments, a grievance within the scope of Chapter 9 of
the TAA? If this is said to be so by virtue of section 104(2)(c) of the TAA, the
submissions must identify the section in any relevant tax Act providing for objection
or appeal in respect of such a grievance.
(c) Did the High Court dis miss the rescission application on any grounds other than its
finding that the certified statement was not in law susceptible of rescission? If so, what
were such other grounds and where in the judgment are the High Court’s findings in
that regard to be found?”
3 See Turnbull-Jackson v Hibiscus Court Municipality [2014] ZACC 24; 2014 (6) SA 592 (CC); 2014 (11) BCLR
1310 (CC) at para 54 and Camps Bay Ratepayers’ and Residents’ Association v Harrison [2010] ZACC 19; 2011
(4) SA 42 (CC); 2011 (2) BCLR 121 (CC) at para 28.
ROGERS AJ
5
appeal under Chapter 9 of the TAA. I have already quoted the effect which section 174
gives to a statement so filed.
[8] Three other features of the TAA should be mentioned:
(a) Section 164(1) embodies the “pay now, argue later” rule. Unless a senior
SARS official otherwise directs, the obligation to pay tax is not suspended
by an objection or appeal in terms of Chapter 9.
(b) Section 170 provides that the production of a document issued by SARS,
purporting to be a copy of or an extract from an assessment, is “conclusive
evidence” of two thing s: “the making of the assessment”; and, except in
proceedings on appeal against the assessment, “that all the particulars of
the assessment are correct”.
(c) Sections 175 and 176 empower SARS to amend or withdraw a certified
statement filed with the court . If SARS withdraws a certified statement,
it is empowered by section 176(2) to file a new certified statement in
terms of section 172, recording tax which was included in the withdrawn
statement.
The IT Act and VAT Act
[9] The relevant provisions of the TAA had antecedents in the Income Tax Act4
(IT Act) and the Value -Added Tax Act5 (VAT Act). In order to understand the
authorities, reference must be made to these provisions.
[10] Section 91(1)(b) of the IT Act entitled the Commissioner for Inland Revenue to
file a certified statement with the court setting out the “amount of tax or interest” 6 due
or payable by the taxpayer, and it was stipulated that “such statement shall thereupon
have all the effects of, and any proceedings may be taken thereon as if it were, a civil
4 58 of 1962.
5 89 of 1991.
6 The reference to “interest” was inserted by section 16(b) of the Income Tax Amendment Act 6 of 1963.
ROGERS AJ
6
judgment lawfully given in that court in favour of the Commissioner for a liquid debt
of the amount specified in the statement”. Section 88 contained the “pay now, argue
later” rule. Section 92 provided that it was not competent for any person, in connection
with a certified statement filed in terms of section 91, to question “the correctness of
any assessment on which such statement is based”, notwithstanding that objection and
appeal may have been lodged against the assessment. Section 94 cont ained a
“conclusive evidence” provision practically identical to section 170 of the TAA. By
way of section 26(a) of the Income Tax Act 55 of 1966, section 91(1)(bA) was inserted
into the IT Act. This provision empowered the Commissioner to withdraw a filed
statement, in which event “such statement shall thereupon cease to have any effect”. In
terms of a proviso, the Commissioner was entitled to institute proceedings afresh under
section 91(1)(b) in respect of any tax or interest referred to in the withdrawn statement.
[11] Sections 40(2)(a), 40(2)(b), 40(5) and 42 of the VAT Act were in the same terms
as sections 91(1)(b), 91(1)(bA), 92 and 94 of the IT Act. The “pay now, argue later”
rule was contained in section 36 of the VAT Act. These provisions of the IT Act and
the VAT Act were repealed when the TAA came into force. Despite modest changes
in formulation, the essential features of the repealed provisions were replicated in the
TAA.
Authorities from 1965 to 2011
[12] In 1965 the Cape Provincial Divisio n in Kruger I7 heard an appeal against a
decision of a Magistrates’ Court refusing rescission of a section 91 tax judgment on the
basis that such a judgment was not rescindable. The Full Court held that a tax judgment
was indeed susceptible of rescission in terms of section 36(a) of the
Magistrates’ Courts Act,8 which empowers a Magistrate’s Court to “rescind or vary any
judgment granted by it in the absence of the person against whom that judgment was
7 Kruger v Commissioner for Inland Revenue 1966 (1) SA 457 (C) (Kruger I).
8 32 of 1944. Section 36(a) still exists in this form.
ROGERS AJ
7
granted”. The appeal failed, however, because the tax payer had not brought his
rescission application timeously.
[13] A subsequent round of litigation between the same taxpayer and the revenue
authorities reached the Appellate Division in 1972 – Kruger II.9 The taxpayer was
seeking to recover, by way of the condictio indebiti (unjustified enrichment), money he
had paid “under duress” pursuant to the tax judgment discussed in Kruger I. If the tax
judgment had the quality of an ordinary civil judgment, the “duress” exerted on the
taxpayer was not unlawful, and recovery by way of the condictio was barred. Counsel
for the taxpayer argued that the tax judgment did not preclude recovery, because unlike
an ordinary judgment it did not involve a judicial determination of any issue. Jansen JA
said that this submission was incompatible with the language of section 91(1)(b).10
[14] In the alternative, counsel for the taxpayer argued that a judgment, such as a tax
judgment, which did not involve a decision on the merits was not a bar to the
condictio indebiti. Although, so cou nsel argued, the taxpayer could apply for
rescission, such an application would always be doomed to failure, because section 94
would require the court hearing the rescission application to treat the assessment as
conclusive evidence of its correctness. I n other words, the taxpayer could never, in
rescission proceedings, demonstrate a bona fide defence.
[15] In response to this argument, Jansen JA said that the taxpayer’s counsel had
rightly not argued that Kruger I was wrong in holding that a tax judgment was
rescindable.11 As to the limits imposed by section 94, Jansen JA said that the
“conclusive evidence” only related to the making and correctness of the assessment.
“Assessment” was a defined term. Various matters going to the merits of a tax judgment
could still be contested, for example the computation of the tax, the question of the date
9 Kruger v Sekretaris van Binnelandse Inkomste 1973 (1) SA 394 (A) (Kruger II).
10 Id at 411G-412A.
11 Id at 412D-E.
ROGERS AJ
8
from which interest ran, and the lawfulness of the levying of tax. Notwithstanding
section 94, therefore, there was a wide field of defence s available to a taxpayer in
rescission proceedings.12
[16] In Traco Marketing,13 Melunsky J held, with reference to the Kruger judgments,
that a tax judgment taken in terms of section 40(2)(a) of the VAT Act was rescindable.
When the judgment was taken in a superior court, rules 31(2)(b) and 42 of the Uniform
Rules of Court were not applicable, but the judgment was rescindable in terms of the
common law. He concluded, however, that the taxpayer had not shown good cause.
[17] In May 2000, a Full Court of the Cape Provincial Division in the
unreported judgment of Barnard14 confirmed that a Magistrate had jurisdiction to
entertain a rescission application in relation to a tax judgment taken in terms of
section 40(2)(a) of the VAT Act. The rescission application was remitted to the
Magistrate’s Court to be dealt with on its merits.
[18] Later in 2000 came this Court’s decision in Metcash.15 This Court had to decide
whether to confirm orders of the High Court declaring sections 36(1), 40(2)(a)
and 40(5) of the VAT Act invalid. Kriegler J delivered the Court’s unanimous
judgment. He considered each of the impugned sections individually, and found them
to be constitutionally compliant. He finally considered an argument by the applicant in
that matter that the cumulative effect of the three impugned pro visions, read together
with the “conclusive evidence” provision in section 42, effectively ousted the
jurisdiction of the courts. Such ouster meant, so it was contended, that section 40(2)(a)
12 Id at 412F-H.
13 Traco Marketing (Pty) Ltd v Minister of Finance 1998 (4) SA 74 (SE) (Traco Marketing).
14 Barnard v Kommissaris van Binnelandse Inkomste , unreported judgment of the Cape Provincial Division,
Case No A127/97 (19 May 2000).
15 Metcash Trading Ltd v Commissioner, South African Revenue Service [2000] ZACC 21; 2001 (1) SA 1109
(CC); 2001 (1) BCLR 1 (CC) (Metcash).
ROGERS AJ
9
did not in truth entail recourse to a court of law but was “a m ere administrative step
aimed at facilitating the extra-judicial recovery of tax”.16
[19] Kriegler J said that the decisions in Kruger I and II provided “clear judicial
authority” at odds with the applicant’s argument. In these cases the courts found (a) that
a tax judgment was in principle susceptible of rescission; and (b) that despite the
“conclusive evidence” section of the IT Act, there was a wide field of defences available
in rescission proceedings.17
[20] In Mokoena,18 the Court rightly regarded Kruger II and Metcash as authority for
the proposition that rescission of a tax judgment is competent. The Court’s finding that
the taxpayer had a bona fide defence was enough to dispose of the case. The Court
went on, however, to hold that SARS was not entitled to t ake a tax judgment when an
objection against the assessment had already been lodged, and that for this reason the
tax judgment was a nullity.
[21] BLI also relies on the Supreme Court of Appeal’s judgment in Singh,19 where it
was held that SARS is obliged to give a taxpayer notice of an assessment before taking
a tax judgment in terms of section 40(2)(a) of the VAT Act. One of the grounds on
which the High Court in Singh had held that SARS was not required to give the taxpayer
notice was that, since the taxpaye r could only challenge the assessment by objection
and appeal, notice of the assessment was a pointless exercise. In reversing the
High Court, the Supreme Court of Appeal said, with reference to paragraph 66 of
Metcash, that a taxpayer subjected to an ass essment was possessed of a “wide field of
defences” which he could raise against an assessment in order to pre-empt the taking of
a tax judgment.20 What the Supreme Court of Appeal was saying is that the “wide field
16 Id at para 64.
17 Id at paras 65-6.
18 Mokoena v Commissioner, South African Revenue Service 2011 (2) SA 556 (GSJ).
19 Singh v Commissioner, South African Revenue Service [2003] ZASCA 31; 2003 (4) SA 520 (SCA).
20 Id at para 20.
ROGERS AJ
10
of defences” open to a taxpayer when rescinding a tax judgment was equally available
to a taxpayer who wished to impeach an assessment before a tax judgment was taken.
Recent cases
[22] The High Court was referred to the authorities discussed above yet did not deal
with them. Instead, so BLI complains, the High Court followed more recent provincial
decisions which were adverse to BLI’s contentions on rescindability . The respondents
in this Court support these cases and the High Court’s reasoning in the present matter.
[23] The first is Capstone,21 from which the High Court quoted a passage to the effect
that although a tax judgment in terms of section 91(1)(b) of the IT Act has all the effects
of a judgment, “it is nevertheless not in itself a judgment in the ordinary sense” and
“does not determine a ny dispute or contest between the taxpayer and the
Commissioner”.22 However, the Court in this passage from Capstone was not dealing
with rescindability, but with the question whether SARS could lawfully take a tax
judgment when there was a pending objecti on and appeal. The Court disagreed with
Mokoena on that issue. The Court did not question the proposition that a tax judgment
was in principle rescindable.23
[24] The next judgment on which the High Court relied was Modibane,24 which was
also concerned with section 91(1)(b) of the IT Act. The taxpayer appeared in person,
which may explain why the Court did not discuss the relevant authorities. The Court
quoted the passage in Capstone mentioned in the previous paragraph as if it were
authority for the proposition that a tax judgment is not rescindable, and did not refer to
21 Capstone 556 (Pty) Ltd v Commissioner, South African Revenue Service 2011 (6) SA 65 (WCC) (Capstone).
22 Id at para 37.
23 In paragraph 35 of Capstone, the Judge raised the question whether Kruger II and Metcash were authority for
the proposition that rescission is still available where SARS has already withdrawn the certified statement. In
Mokoena, the taxpayer only applied for rescission after SARS had already withdrawn the certified statement.
24 Modibane v South African Revenue Service , unreported judgment of the South Gauteng High Court,
Johannesburg, Case No 09/9651(20 October 2011).
ROGERS AJ
11
the Kruger cases or Traco Marketing. Although the Court cited Metcash, it only
mentioned the paragraphs dealing with the “pay now, argue later” rule; it did not heed
paragraphs 65 and 66, which approved the Kruger cases and accepted that tax
judgments are in principle rescindable. The Court mentioned Mokoena, but only to say
that, like Capstone, it disagreed with it. As I have said, Capstone does not provide
authority for the view that a tax judgment is not susceptible of rescission . Modibane
has, for these reasons, been criticised academically as having been wrongly decided.25
[25] The last judgment cited by the High Court was Van Wyk,26 decided with
reference to the TAA. SARS appealed a decision by a Magistrate granting rescission
of a tax judgment. Towards the end of the High Court’s judgment in Van Wyk, there is
a terse statement that the Magistrate’s Court was not entitled to entertain the rescission
application “as it was not a civil judgment in the ordinary sense” and that the certified
statement “could not be regarded as having the character of a judicially delivered
judgment”.27 The judgment contains no reference to the Kruger decisions. And again,
although Metcash was cited, the passages relevant to rescindability were not mentioned.
[26] In its submissions, SARS cites the recent High Court decision, Hamid,28 which
dealt with the question whether a certified statement filed with a court in terms of
section 114(1)(a)(ii) of the Customs and Excise Act29 is susceptible of rescission. The
High Court said no. Sections 114(1)(a)(ii) and (iii)(aa) of the Customs and Excise Act
are practically identical to the repealed sections 91(1)(b) and (bA) of the IT Act and the
repealed sections 40(2)(a) and (b) of the VAT Act. It is not apparent from the
High Court’s reasoning why it did not regard Kruger II and Metcash as binding on it.
The High Court did not mention and discuss paragraphs 65 and 66 of Metcash. If there
25 Moosa “Rescission of a tax ‘judgment’” (April 2012) De Rebus 30.
26 South African Revenue Service v Van Wyk , unreported judgment of the Free State High Court, Bloemfontein,
Case No A145/2014 (5 June 2015).
27 Id at para 29.
28 Hamid v South African Revenue Service s, unreported judgment of the High Court of South Africa,
KwaZulu-Natal Local Division, Durban, Case No 3280/2017 (30 November 2021).
29 91 of 1964.
ROGERS AJ
12
are distinguishing features of the regime in the Customs and Excise Act, a point which
it is unnecessary for us to decide, they are not apparent from the High Court’s judgment.
The High Court in Hamid referred to several earlier decisions in the same Division
where the High Court had assumed, or where it had been conceded by SARS, that a
tax judgment in terms of section 114 is indeed rescindable. SARS’ reliance on Hamid
is therefore misconceived.
Discussion
[27] The courts in Modibane and Van Wyk were bound by the decisions in Kruger II
and Metcash. Since Kruger II was not mentioned at all, and since the relevant passages
in Metcash were overlooked, there was no attempt to distinguish them or to suggest that
the pronouncements on rescindability were non -binding observations made in passing
(obiter dicta). While it might be argued that the discussion of rescission in Kruger II
was obiter,30 the same cannot be said of Metcash. The fact that tax judgments are
susceptible of rescission, and that certain defences remain available to a taxpayer in
rescission proceedings, was an integral part of this Court’s reasoning in finding that the
cumulative effect of the statutory provisions was not constitutionally repugnant.
[28] The High Court in the present case was bound not only by Kruger II and Metcash
but also by the Full Court judgments in Kruger I and Barnard. The High Court was
much impressed by the fact that SARS has the power to amend or withdraw a certified
statement. This showed, in the High Court’s view, that a tax judgment is not a “final”
judgment and is unlike an ordinary civil judgment. As I have shown, however, the
power to withdraw a certified statement was a feature of the IT Act since 1966, and was
from the outset part of the VAT Act. That this feature did not change anything is
apparent from Traco Marketing, Barnard and Metcash. It is true that the TAA entitles
SARS to amend a certified statement and not only to withdraw it, but this additional
power cannot be regarded as materially changing the legal character of a tax judgment.
The power of withdrawal is itself at odds with a supposed requirement of finality.
30 See Kruger II above n 9 at 413D-E.
ROGERS AJ
13
Furthermore, the power of withdrawal conferred by the IT Act and VAT Act was
coupled with an express entitlement to file a new certifi ed statement, which was a
practical means of amending the tax judgment.
[29] Since all the relevant authorities were drawn to the High Court’s attention, it is
unacceptable that it did not discuss them and either follow them or explain why it
thought they were distinguishable. In the light of the authorities to which the
High Court was referred, it is difficult to fathom the Court’s statement, when refusing
leave to appeal, that there were no conflicting judgments on rescindability. BLI again
raised Metcash, on which the Court said this:
“It appears that the applicant elected to rely on a comment in passing by the learned
judge in Metcash and concluded that it is good law for their case.
. . .
It is of importance to acknowledge that context is everything, w hen it comes to the
proper interpretation of the legislation. When the Constitutional Court commented as
it did, in Metcash it did not make a finding of law on this subject. It merely made an
observation.”31
[30] The reasoning in Metcash on rescindability was not “merely . . . an observation”,
it was an integral part of this Court’s reasoning. And Metcash in turn endorsed the two
judgments in Kruger. Observance of the rules of precedent is not a display of politeness
to courts of higher authority; it is a co mponent of the rule of law, which is a founding
value of the Constitution.32
[31] The High Court’s cursory dismissal of the alternative constitutional challenge is
also unsatisfactory. Having wrongly found that a tax judgment is not rescindable, the
High Court was required to revisit the constitutional challenge assessed in Metcash,
31 Barnard Labuschagne Incorporated v South African Revenue Services, unreported judgment of the High Court
of South Africa, Western Cape Division, Cape Town, Case No 23141/2017 (17 July 2020) at paras 30 and 35.
32 See the cases cited in n 3 above.
ROGERS AJ
14
bearing in mind that the rescindability of tax judgments was an integral part of
this Court’s reasons for dismissing the constitutional challenge. However, nothing
more need be sai d about this, since the High Court’s finding on rescindability was
wrong.
[32] As I have said, in this Court the respondents have persisted in placing reliance
on the more recent High Court judgments. Of those judgments, Capstone – as I have
shown – is not authority for the respondents’ contentions, while Modibane and Van Wyk
failed to address binding authority. The respondents seek to distinguish Kruger I and II,
Traco Marketing and Metcash on the basis that they dealt with different legislation.
However, since the now repealed provisions of the IT Act and VAT Act were the
forerunners of the relevant provisions of the TAA, the earlier cases are only
distinguishable if the new provisions brought about substantive changes bearing on the
question of rescindability. I shall deal presently with the features of the TAA on which
the respondents place reliance, but it may be mentioned in passing that two of the cases
on which they rely, Capstone and Modibane, were decided with reference to the IT Act,
not the TAA.
[33] SARS submits that that there are “differences distinguishing the position of
self-regulating vendors under the value -added tax system and taxpayers under the
entirely revenue authority -regulated income tax dispensation”. On this basis, SARS
argues that the considerations which persuaded this Court in Metcash to reject the
constitutional attack on the relevant provisions of the VAT Act might not apply equally
to the constitutionality of the corresponding provisions in the IT Act. SARS has not
explained, however, why the virtually identical provisions in the IT Act would have
been subject to different considerations. Moreover, the issue now under discussion is
not one of constitutional validity, but whether a tax judgment is rescindable. In
Metcash, which concerned the VAT Act, this Court accepted the correctness of the
Kruger judgments on this issue, and the Kruger judgments were decided with reference
to the IT Act.
ROGERS AJ
15
[34] With reference to Metcash, the Minister makes the sub mission that
this Court’s statements in paragraphs 65 and 66 were non -binding observations made
in passing. As I have explained, that proposition is incorrect. In the alternative, the
Minister submits that this Court is not bound by its previous decision and ought not to
follow it. However, this Court will not depart from an earlier binding statement of
the Court unless satisfied that the earlier statement was “clearly wrong”. 33 In applying
this rule of precedent to itself as the country’s apex Court, th e Court must tread with
caution: it “must not easily and without coherent and compelling reason deviate from
its own previous decisions, or be seen to have done so”.34
[35] The features of the TAA which, according to SARS, are at odds with rescission,
are the following. First, SARS contends that the civil judgment secured by the filing of
a certified statement “lacks the rights -determining character of a judicially issued
judgment”. That is so, but it was also true of the repealed provisions of the IT and
VAT Acts considered in the Kruger and Metcash cases.
[36] Second, SARS points to the Commissioner’s right to withdraw a certified
statement and to institute proceedings afresh for the same tax. I have already dealt with
this feature, explaining that the power of withdrawal and reinstitution was a
long-standing feature of the regimes established by the IT Act and VAT Act. I should
add this on the question of the finality of judgments in the context of the present
discussion. A characteristic of an interim order is that it may be revised or discharged
by the same court which granted the order. 35 The power to vary and rescind orders is
needed in the case of final judgments, because a court does not ordinarily have the
power to vary or discharge its final orders. I t is always open to a judgment creditor to
abandon a final judgment or to waive its rights thereunder in whole or in part. The fact
33 This Court is required, by the rules of precedent, to follow a binding statement in an earlier judgment of
the Court unless satisfied that the earlier statement was clearly wrong: Turnbull-Jackson above n 3 at para 57.
34 Gcaba v Minister for Safety and Security [2009] ZACC 26; 2010 (1) SA 238 (CC); 2010 (1) BCLR 35 (CC) at
para 62.
35 Meyer v Meyer 1948 (1) SA 484 (T) at 490 and South Cape Corporation (Pty) Ltd v Engineering Management
Services (Pty) Ltd 1977 (3) SA 534 (A) at 549G-551A.
ROGERS AJ
16
that a judgment creditor may do so does not mean that the judgment is not final. In the
context of a tax judgment, it is the judgment creditor, SARS, which has the power under
the TAA to amend or withdraw the certified statement. At least in commercial effect,
this is not unlike the right of abandonment which a judgment creditor has in respect of
a judgment granted in its favour. More importantly, however, the court with which the
certified statement is filed has no power to treat the tax judgment as an interim order
which it may vary or discharge. In relation to the court and to the judgment debtor
(the taxpayer), the tax judgment is final, not interim. The availability of rescission is
thus not out of place.
[37] The features of the TAA, which the Minister contends to be incompatible with
rescission, include the argument I have addressed in the preceding paragraph. The
Minister’s second point is that, in terms of section 172(2) of the TAA, SARS may file
a certified statement irrespective of whether or not the tax debt is subject to an objection
or appeal under Chapter 9. It is true that the IT Act and VAT Act did not contain express
provisions to this effect. However, there was no prohibition against the filing of a
certified statement if the tax debt was subject to an objection or appeal, and section 92
of the IT Act and section 40(5) of the VAT Act envisaged that a certifi ed statement
might indeed be filed in such circumstances. It was provided in those sections that it
was not competent for any person to question the correctness of any assessment on
which a tax judgment was based, “notwithstanding that objection and appeal may have
been lodged thereto”. Of course, where the grounds on which a tax judgment is
impeached in rescission proceedings are grounds which are being pursued, or can be
pursued, by way of objection and appeal under Chapter 9, an applicant for rescissio n
will be unable to establish a bona fide defence, because the court hearing the rescission
application will not be entitled to go behind the certified statement. This was recognised
in Kruger II and Metcash, but it was nevertheless held that tax judgment s were
susceptible of rescission and that there were a number of grounds on which the taxpayer
might still legitimately base an application for rescission.
ROGERS AJ
17
[38] Third, the Minister emphasises that section 174 of the TAA requires the certified
statement to be treated as a civil judgment “lawfully given” in the relevant court. This
is said to be inconsistent with the notion that a taxpayer can challenge the tax judgment
on the grounds of its unlawfulness or invalidity. The “lawfully given” terminology was,
however, also a feature of section 91(1)(b) of the IT Act and section 40(2)(a) of the
VAT Act. A judgment may be lawfully given even though grounds exist for its
rescission.
[39] Finally, the Minister refers to the dispute resolution mechanisms in Chapter 9 of
the TAA, and to section 105 which states that a taxpayer may only dispute an
assessment or “decision” in proceedings under Chapter 9. This was, however, the
practical effect of the regimes in the IT Act and VAT Act, because it was only by way
of objection a nd appeal that a taxpayer could go behind an assessment on which a
certified statement was based. Rescission is only of practical significance where a tax
judgment is impeached on grounds which cannot be pursued by objection and appeal,
because it is only in such cases that an applicant for rescission can potentially establish
a bona fide defence. Whether the present matter is such a case will be addressed in the
next part of this judgment.
[40] The position thus remains that a tax judgment in terms of the TAA is susceptible
of rescission, in terms of sectio n 36(1)(a) of the Magistrates’ Courts Act or , in the
High Court, in terms of the common law jurisdiction to rescind judgments taken in the
absence of the other party.
[41] Our affirmation of Kruger II and Metcash must not be misunderstood. The
judgments in these cases make clear that the “conclusive evidence” provisions in the
tax legislation considerably narrow the scope of bona fide defences which the taxpayer
can raise. Apart from the “conclusive evidence” provision in section 170 of the TAA,
another limitation on bona fide defences arises from section 105 of the TAA, which
forms part of the dispute resolution procedures of Chapter 9. These procedures are
initiated by an “objection”. In terms of sect ions 104(1) and (2), a taxpayer may only
ROGERS AJ
18
object to an “assessment” or “decision” of the kind specified in section 104(2). If the
taxpayer’s grievance concerns an “assessment” or “decision”, section 105 stipulates
that the taxpayer may only dispute such as sessment or decision “in proceedings under
this Chapter, unless a High Court otherwise directs”. The “unless” proviso caters for
those relatively rare situations where a High Court regards it appropriate to grant
declaratory relief on legal questions relating to assessments.36 For present purposes, the
point to note is that section 105 will generally have the effect that, in rescission
proceedings, the taxpayer will struggle to demons trate a bona fide defence if its
grievance relates to an assessment or decision governed by Chapter 9.
Rescindability in this case
[42] The dispute in this case is not covered by the “conclusive evidence” provisions
of section 170 nor is it excluded by section 105. As to section 170, BLI is not
challenging the correctness of the s elf-assessments; the question is whether they have
been paid. As to section 105, the High Court said that Chapter 9 was available to BLI,
but did not explain how. BLI was not complaining about an “assessment”. Nor was it
complaining about a “decision” as defined in section 104(2) of the TAA. Paragraphs (a)
and (b) of section 104(2) are obviously inapplicable. Paragraph (c) covers “any other
decision that may be objected to or appealed against under a tax Act”. There is no
provision in any relevant tax legislation stating that a dispute about whether an
assessment has been paid is subject to objection or appeal.
[43] SARS highlights the definitions of “assessment” and “self -assessment” in
section 1 of the TAA. Such assessments involve a “determination” of a “ tax liability”
by SARS or a taxpayer respectively. SARS emphasises that in terms of section 100 of
the TAA, an assessment is final if no objection to it has been made. BLI, so SARS
points out, has not objected against it s self-assessments. All of this is so , but the
contentions miss the point. A self -assessment may correctly determine the taxpayer’s
tax liability, but the liability may thereafter be discharged by payment. SARS has not
36 See Metcash above n 15 at para 45.
ROGERS AJ
19
pointed to any statutory provision which renders payment disputes subject to objection
in terms of Chapter 9 of the TAA.
[44] SARS goes on to argue that the jurisdictional requirement for filing a certified
statement in terms of section 172 is an “outstanding tax debt”. To put the matter more
accurately, section 172(1) provides that SARS may file a certified statement “[i]f a
taxpayer fails to pay tax when it is payable”, and the certified statement must set out
“the amount of tax payable”. The question posed by this Court’s directions focused not
on disputes concerning the initial tax liability but on disputes as to whether the tax
liability remained outstanding . In this case, SARS evidently considered that the tax
liability had not subsequently been paid, hence the filing of the certified statement, but
BLI contended otherwise. If the payment dispute is not a matter required to be dealt
with by way of objection in terms of Chapter 9, it is one of those “defences” which
the Courts in Kruger II and Metcash had in mind as being available to a taxpayer in
rescission proceedings.
[45] In the Minister’s submissions, the issue is said to be whether an objection to a
taxpayer’s own self -assessments is a grievance falling within the scope of Chapte r 9.
Clearly the answer to that question is yes, but it is not the question which this Court
asked the parties to address. The question framed by this Court was whether a grievance
to the effect that a certified statement disregarded payments allegedly m ade in respect
of self-assessments fell within the scope of Chapter 9.
[46] It follows that the High Court should have found that the tax judgment was
susceptible of rescission and should have considered whether BLI had made out a case
for rescission at common law. This Court recently repeated the well -known
requirements: first, the applicant must give a reasonable and satisfactory explanation
for its default ; and second, it must show that on the merits it has a bona fide defence
ROGERS AJ
20
which prima facie carries some prospect of success.37 Because the procedure for taking
a tax judgment does not call for a proce dural response from the taxpayer, the focus
inevitably falls on the second of these requirements.
Did the High Court decide the merits?
[47] In their written submissions, all the parties agree that the High Court did not
dismiss the rescission application on any ground other than that a certified statement is
not in law susceptible of rescission. This accords with my reading of the High Court’s
judgment. In the circumstances, it is unnecessary to consider whether, as BLI contends,
the hearing in the High Court was confined to the question of rescindability and the
alternative constitutional challenge, with the merits to stand over for later decision.
[48] The Minister submits that this Court is not precluded from finding that the
rescission application should be d ismissed on its merits. In my view, it is not
appropriate for this Court to embark on that question at first instance. The proper course
is to remit the matter to the High Court to decide the merits of the rescission application.
Conclusion
[49] In view of some adverse remarks made by the High Court about BLI, including
criticism based on the High Court’s erroneous view on rescindability, prudence dictates
that the merits should be heard by a different Judge.
[50] The costs of proceedings in the High Court thus f ar should stand over for
determination in the remitted proceedings. There is no reason, however, why costs
should not follow the result in this Court. Since BLI’s applications to the High Court
and Supreme Court of Appeal for leave to appeal should have succeeded, the
respondents must also pay BLI’s costs in those applications.
37 Zuma v Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and
Fraud in the Public Sector Including Organs of State [2021] ZACC 28; 2021 (5) SA 327 (CC); 2021 (11) BCLR
1263 (CC) at para 71.
ROGERS AJ
21
Order
[51] The following order is made:
1. Leave to appeal is granted.
2. The appeal is upheld.
3. The order of the High Court is set aside.
4. The applicant’s application for rescissi on is remitted to the High Court
for hearing before a different Judge in order to determine the merits of the
application.
5. The costs incurred to date in the High Court stand over for determination
in the remitted proceedings.
6. The respondents must pay the applicant’s costs in t he applications to the
High Court and Supreme Court of Appeal for leave to appeal.
7. The respondents must pay the applicant’s costs in this Court.
For the Applicant:
For the First Respondent:
For the Second Respondent:
A G Christians instructed by Barnard
Labuschagne Incorporated t/a Ettienne
Barnard Attorneys
N Bawa SC and T S Sidaki instructed by
the State Attorney, Cape Town
N Maenetje SC and M Stubbs instructed
by the State Attorney, Pretoria