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[2008] ZASCA 19
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Commissioner for the South African Revenue Service (SARS) v Saleem (21/07) [2008] ZASCA 19; [2008] 3 All SA 104 (SCA); 2008 (3) SA 655 (SCA); 70 SATC 115 (27 March 2008)
Links to summary
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number : 21/07
In the matter between :
THE COMMISSIONER FOR THE SOUTH
AFRICAN REVENUE SERVICE (SARS) APPELLANT
and
A SALEEM RESPONDENT
CORAM : CAMERON, COMBRINCK JJA
et
SNYDERS AJA
DATE : 12 MARCH 2008
DELIVERED : 27 MARCH 2008
Summary
: Revenue –
customs and excise – duty of officer when seizing goods in
terms of s 88(1)(c) of Customs and Excise
Act 91 of 1964 –
when justified in absence of books of account and supporting
documents.
Neutral citation:
CSARS v Saleem
(21/2007)
[2008] ZASCA 19
(27 March
2008)
JUDGMENT
COMBRINCK
JA
/
COMBRINCK JA
:
[1] The respondent in this appeal claims to be the owner
and manager of a small clothing retailer known as Payless Fashions
which
conducts business from a shop in Brakpan, Gauteng. During
September and October 2006 officers in the employ of the appellant
seized
and removed some R1,2m worth of goods from these premises on
the basis that they were imported goods for which no import duty had
been paid. The respondent successfully applied to the High Court,
Pretoria, for an order declaring the seizure unlawful and a further
order that the goods seized be returned by a fixed date. With leave
of the court
a quo
(van
Rooyen AJ) the appellant appeals to this court against the order.
[2] The appellant filed an answering affidavit to
respondent’s founding affidavit. No replying affidavit was
filed and the
factual allegations contained in appellant’s
answering affidavit stand unchallenged. Bearing this in mind and
where there
are factual disputes, applying the rule in
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(AD), the factual background to the matter can be
summarised as follows. Acting on complaints that retailers in the
Brakpan area
were trading in illegally imported goods officers in the
employ of the appellant, Van der Merwe and Jansen, in the company of
members
of the Department of Home Affairs and the Metro Police
attended on the respondent’s shop. When enquiring who the owner
was
the respondent replied that he was not the owner, he did not know
where the owner was, but that the owner visited the shop from
time to
time. Van der Merwe explained that they were there to determine
whether the goods being offered for sale had been imported
in
accordance with the provisions of the Customs and Excise Act 91 of
1964 (‘the Act’). The officers examined the goods
on the
floor and established that the vast majority of clothing, shoes and
bags were labelled ‘Made in China’ and had
Chinese
inscriptions on them. Respondent was asked to produce the import
documentation relating to the goods or invoices to prove
from whom
the goods were purchased. The respondent claimed that the goods were
purchased from retailers or wholesalers in Chinatown
(an area in
Johannesburg with many Chinese traders) and Fordsburg. He offered to
take Van der Merwe to his suppliers but Van der
Merwe declined. All
purchases respondent said were for cash. The respondent produced two
or three invoices which were found by
the officers to be unacceptable
in that they contained no description of the goods purchased, nor did
they reflect who the buyer
was. Van der Merwe then served on the
respondent a notice of detention of the goods which recorded that the
goods would remain
sealed and in detention at the shop premises. The
reason for the detention was said to be for further investigation. He
also recorded
that the detention would be lifted once ‘supporting
documents (commercial invoices, MAWB, packing lists, etc)’ were
received. Van der Merwe said that the purpose of the detention was to
afford the owner an opportunity of proving that the goods
had been
lawfully imported. Van der Merwe advised the respondent that he would
afford him and the owner three days till Tuesday
3 October 2006 to
produce the necessary documents. At the instance of the respondent
the further meeting was brought forward to
Monday 2 October. On that
date the respondent introduced Van der Merwe to a Mr Chen who he said
was the owner of the shop. Chen,
according to Van der Merwe, had been
present in the shop on 29 September when he interviewed respondent.
Chen handed in some ten
invoices which suffered from the same
shortcomings as the three previously tendered – in particular
they did not reflect
Payless Fashions as the purchaser, nor did they
contain a description of the goods purchased. Van der Merwe stated
that there was
a huge amount of stock – he estimated the value
to be R1,2m, which he eventually removed with a 8 ton truck. When
asked for
proof of ownership of the business, Chen supplied Van der
Merwe with a VAT number and an income tax number. Van der Merwe
subsequently
found the VAT number to refer to a Mr G Char and the
income tax number to a Mr Py Lu. Van der Merwe advised Chen that the
goods
were subject to forfeiture and that he would be returning to
remove them.
[3] On 3 October the following notice was served on
Chen:
‘
Mr Daoyuan Chen
RE: Seizure of goods in terms of section 88(1)(c
)
On the 29
th
of
September 2006 your goods in the abovementioned shop was detained in
terms of Sect 88(1)(a) of the Customs Act, Act 91 of 1964
as amended.
This was in order to determine if all duties due to the
importation of the goods was brought to the account of the state. The
production
of the invoices or import documents was required under
Sect 101, and Sect 102 of the Customs Act, Act 91 of 1964.
The invoices produced to this office by you did not
contain the necessary information in order to determine that the
invoices are
for the goods in your shop as it did not specify the
goods, Supplier name, and Supplier address. The goods are therefore
deemed
not to be declared upon importation.
The goods detained at your premises on the 29
th
of September are liable to forfeiture under the Act and
will be seized in terms of Sect 88(1)(c) of Act 91 of 1964.
I however want to bring it under your attention that you
may follow the mitigation process in terms of Sect 89 and Sect 93 of
the
Customs Act, Act 91 of 1964.
I trust that the above will be in order, and that you
will understand the importance of the matter.’
On 5 October Van der Merwe seized and removed all the
goods which had indications on them that they had been imported from
China,
leaving behind the stock not so marked. The respondent
thereafter on 9 October launched the present application for return
of the
goods.
[4] The learned judge in the court below correctly
approached the matter of the detention and seizure of the goods in
the light
of the fundamental rights enshrined in the Constitution.
The enquiry, he said, in determining the powers of an official acting
in terms of the provisions of the Act, in particular s 88(1)(a)
was whether he had a reasonable suspicion that the goods after
later
examination might be liable to forfeiture. He examined the facts and
concluded that Van der Merwe had a suspicion that the
goods were
illegally imported but in the circumstances this suspicion or belief
was not reasonable. The mere fact that the goods
bore labels
indicating they were made in China was, said the judge, insufficient
to justify the inference that they were imported.
Further
investigation should have been made. When the respondent offered to
take the officers to his suppliers, they should have
complied. By
refusing to go, so the judge reasoned, they made it practically
impossible for him to produce proof as to the persons
from whom the
goods were obtained. To require the respondent to have brought the
sellers to Van der Merwe was held to be ‘
. . . an unreasonable
and impractical approach’. The ratio of the decision is in the
following paragraph:
‘
[18] The seizing of goods is a
serious matter which impacts upon both privacy and dignity. Within a
rule of law state, organs of
state, such as the officer acting in the
place of the Commissioner, should apply his mind properly to the
jurisdictional facts,
of which he must be convinced, before seizing.
To simply base the decision to seize on the absence of supporting
documentation
was not justified. Of course, the first leg of s 102
could be satisfied by providing proof by way of invoices. But that is
not what s 102 necessarily requires: the applicant could have
produced proof in another manner
eg
by taking the officer to the
persons from whom he had bought the goods. There is no absolute
requirement of documentation here.
There was, accordingly, a
substantial omission; an omission to consider a factual circumstance
which the applicant said existed
and could exonerate him. Had van der
Merwe or a member of his staff accompanied the applicant and it
amounted to a wild goose chase,
the officer could at least have said
that he had seriously attempted to consider the full range of
relevant facts in terms of s 102.’
He concluded by finding that at the heart of the error
by Van der Merwe lay his omission to enquire properly so as to come
to a
rational decision. He therefore granted the following order:
‘
1. The seizing of the goods
from the applicant’s premises at shop 7, Brakpan Plaza,
Voortrekker Road is declared to have been
unlawful
2. The Commissioner must, at its own costs, restore into
applicant’s possession at the said shop the goods listed in
Schedule
A on or before Friday 27 October at 16:00
3. Second Respondent must pay the costs of the
applicant.’
[5] At the commencement of the appeal, the attorney
acting for the respondent applied for the appeal to be struck from
the roll
for non-compliance with Rule 49(3) of the Uniform Rules of
Court. The notice of appeal, he argued, did not set out what was
required
to be contained in it by that Rule. As pointed out by
counsel for the appellant, it is Rule 7(3) of the Rules of this court
which
is applicable. The notice of appeal complies with Rule 7(3).
The point
in limine
is
therefore dismissed.
[6] There were two procedural points relating to notice
to be given to the appellant and
locus standi
of the respondent raised in the court below and in the
appellant’s heads of argument. Counsel for the appellant,
however,
indicated at the commencement of his argument that these
points were not being pursued. Nothing further need therefore be said
about them. The true issue here, so counsel submitted, is not one of
interpretation of the Act, but whether on the facts before
the court
it was correct in finding that Van der Merwe’s belief that the
goods were being illegally imported and therefore
subject to
detention and seizure was not reasonable. Counsel argued that on the
uncontroverted evidence of Van der Merwe he had
every reason to
believe on reasonable grounds that the goods were imported and that
they had been imported in contravention of
the provisions of the Act.
[7] The seizure of the goods by Van der Merwe was an
administrative act which had to be exercised in conformity with the
requirements
of the Constitution as spelt out in the Promotion of
Administrative Justice Act 3 of 2000. (See
CSARS
v Trend Finance (Pty) Ltd
2007 (6) SA 117
(SCA) par 25.)
The constitutionality of the
extent of the powers the Act gives to an official in the employ of
the appellant was not challenged
by the respondent. The sole issue
therefore, as advanced by appellant’s counsel, is the
reasonableness of Van der Merwe’s
suspicion that the goods were
imported goods and that further investigation would establish that
they were subject to forfeiture.
[8] The goods were detained and sealed by by the Act Van
der Merwe in terms of s 88(1)(a) read with s 4(4)(a) and
4(12)
of the Act. The sections read respectively as follows:
‘
88(1)(a) An officer,
magistrate or member of the police force may detain any ship,
vehicle, plant, material or goods at any place
for the purpose of
establishing whether that ship, vehicle, plant, material or goods are
liable to forfeiture under this Act.’
(4)(4)(a) An officer may, for the purposes of this Act-
(i) without previous notice, at any time enter any
premises whatsoever and make such examination and enquiry as he deems
necessary;
(ii) while he is on the premises or at any other time
require from any person the production then and there, or at a time
and place
fixed by the officer, of any book, document or thing which
by this Act is required to be kept or exhibited or which relates to
or which he has reasonable cause to suspect of relating to matters
dealt with in this Act and which is or has been on the premises
or in
the possession or custody or under the control of any such person or
his employee;
(iii) at any time and at any place require from any
person who has or is believed to have the possession or custody or
control of
any book, document or thing relating to any matter dealt
with in this Act, the production thereof then and there, or at a time
and place fixed by the officer.
(iv) . . . .’
‘
(4)(12) An officer may lock
up, seal, mark, fasten or otherwise secure any warehouse, store,
room, cabin, place, vessel, appliance,
utensil, fitting, vehicle or
goods if he has reason to believe that any contravention under this
Act has been or is likely to be
committed in respect thereof or in
connection therewith.’
The goods were seized by Van der Merwe in terms of
s 88(1)(c):
‘
(c) If such ship, vehicle,
plant, material or goods are liable to forfeiture under this Act the
Commissioner may seize that ship,
vehicle, plant, material or goods.’
[9] Goods are liable to forfeiture in terms of s 87(1)
if they have been dealt with contrary to the provisions of the Act or
in respect of which an offence under the Act has been committed –
in short, goods brought into the country without declaring
them and
paying the necessary custom duty. The suspicion on reasonable grounds
required of an officer such as Van der Merwe at
the time of seizure
must therefore be that:
(a) the goods found are imported goods;
(b) they have been imported without compliance with the
provisions of the Act;
(c) they are liable to forfeiture.
[10] In policing the Act the appellant’s hand is
strengthened by the provisions of s 101 and 102(1). The former
provides
that any person carrying on any business in the Republic
must keep books, accounts and documents relating to his transactions
which
he shall on demand produce. The latter places an obligation on
any person selling or dealing in imported goods to produce on request
by an officer proof as to the person from whom the goods were
obtained or if he is the importer or owner of the goods the place
where the duty due therefor was paid, the date of payment and the
particulars of the entry for home consumption, etc.
[11] When examining Van der Merwe’s conduct there
is one important factor which it appears was overlooked by the judge
a quo.
That is that
neither the respondent nor Chen at any stage contended that the goods
were not imported. The respondent does not allege
in his founding
affidavit that the goods were not imported. Van der Merwe in his
affidavit made allegations such as the following:
‘
A few invoices tendered did
not in any way explain the huge stock and the imported stock were for
all intents and purposes not traceable
to any other importer than Mr
Chen. I submit there can be no doubt that Mr Chen as the alleged
owner had a beneficial interest
in the said stock during the
importation thereof.’
And:
‘
The seized goods were clearly
being imported into the Republic and Mr Chen cannot furnish proof of
the legal importation of such
goods. Even if he alleges that he has
not imported the said goods, but has bought it lawfully from a local
distributor, he must
be in a position to furnish invoices to trace
the goods to the original importer of the goods.’
These allegations stand unchallenged. The conclusion by
the judge in the following passage is thus unfounded:
‘
Finally, the officer should
have investigated whether the goods were indeed imported goods. For
all he knew the goods were manufactured
in South Africa in spite of
the ‘Made in China’ tags and the Chinese inscription on
the goods. My impression is that
the officer focussed only on one
aspect, the insufficiency of invoices.’
[12] When considering whether Van der Merwe had
reasonable grounds for seizing the goods there are a number of
factors which are
material. First, there is the fact that the goods
were marked as being made in China and bore Chinese inscriptions
coupled with
the fact that neither the respondent nor Chen contended
that they were locally made. Second, the inability of the respondent
and
Chen to produce any books or documents recording where and from
whom they had been purchased. Third, the suspicious conduct of the
respondent and Chen at the first encounter when in Chen’s
presence the respondent said he did not know where the owner was
and
when Van der Merwe returned in October he introduced Chen as the
owner. Four, Chen giving false VAT and tax numbers. Five,
despite
telling Van der Merwe he had bought the goods in Chinatown and
Fordsburg, he, having been given three days to do so, produced
no
documents in the form of invoices or duplicate receipts from his
suppliers. Faced with imminent seizure and forfeiture of the
goods,
one would have expected of an honest trader that he would have
obtained copies of all relevant documents from his suppliers
together
with particulars of the person or persons from whom he had purchased
them with their contact details. The respondent and
Chen did nothing
other than producing a few invoices which were singularly lacking in
particularity. In passing it may be noted
that the respondent filed
no supporting affidavits by his suppliers to confirm the alleged
sales in support of his application.
[13] I therefore take issue with the judge in the court
below that Van der Merwe had to do more by way of investigation than
wait
for documentary proof from respondent in order to establish that
the goods were illegally imported. I also cannot agree that there
was
an obligation on Van der Merwe to accompany respondent to his
suppliers. As stated earlier, respondent was under a statutory
duty
to maintain books of account and documents to reflect from whom the
goods were purchased. These provisions, I suggest, were
introduced in
the Act for the very purpose of facilitating the policing of the
importation of goods into the country. The respondent’s
inability to produce any such documents together with the suspicious
conduct recorded above, were in my view sufficient grounds
for Van
der Merwe to reasonably conclude that the goods were liable to
forfeiture. He was therefore entitled to seize them.
[14] It follows that the appeal must succeed. The case
is an important one for appellant dealing as it does with the conduct
and
duties of his officials and I consider therefore that the costs
of two counsel are warranted. I wish to stress that I have
consciously
not attempted to lay down set guidelines for future
conduct of appellant’s officials when exercising their powers
under the
Act. The facts and circumstances of each detention and
seizure are different. As stated herein before the powers, like any
other
administrative powers, must be exercised fairly and reasonably
in accordance with the purpose and spirit of the Constitution and
with due regard to the rights of the individual.
[15] The following order shall issue:
(1) The appeal is upheld with costs, such costs include
the costs consequent upon the employment of two counsel.
(2) The order of the court below is set aside and there
is substituted the following:
‘
The application is dismissed
with costs.’
……………………
..
P C COMBRINCK
JUDGE OF APPEAL
Concur
:
CAMERON JA
SNYDERS AJA