About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2016
>>
[2016] ZAGPPHC 413
|

|

Annique Health and Beauty (Pty) Ltd v Commissioner of South African Revenue Services (36127/15) [2016] ZAGPPHC 413 (10 June 2016)

IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NUMBER:
18632/12
, 36127/15
DATE:
10 June 2016
Not
reportable
Not
of interest to other judges
Revised
ANNIQUE
HEALTH AND BEAUTY (PTY)
LTD                                                     Applicant
v
COMMISSIONER
OF SOUTH AFRICAN REVENUE SERVICES                    Respondent
JUDGMENT
MABUSE
J:
[1]
This matter conflates two related applications launched by the
applicant against the Commissioner of the South African Revenue

Services, the respondent. The first of these two applications was
instituted in terms of the provisions of the Customs and Excise
Act
No. 91 of 1964 (the Act) and its purpose was to challenge certain
decisions taken by the respondent to raise
ad valorem
excise
duties. For purposes of brevity, I will refer to this application as
the first application. The purpose of the other application,
launched
under case number 36127/15 and which I will refer to as the second
application, was to demand from the respondent repayment
of a sum of
R500,000.00 which the applicant had paid to respondent in accordance
with the respondent's policy of
'pay-now-and-argue later'
in
the first application and which amount the respondent did not pay
back when or after it had retracted the decisions that the
applicant
was challenging in the first application.
[2]
The first application was launched on 2 April 2012 while the second
application was launched on 21 May 2015. Strictly speaking
these two
applications do not deal with identical issues but deal with
substantially related issues in as much as the issues in
the second
application are rooted in the first application.
[3]
The Court was required to decide two issues in these two matters.
Those issues were firstly, who should be liable for the costs
of the
consolidated applications and secondly, from which date should
interest in respect of the amount of R500,000.00 be payable.

Alongside these two applications there was another application in
which the respondent applied for condonation for the late filing
and
delivery of his heads of argument. This application was quickly dealt
with by the parties when Mr Puckrin, counsel for the
applicant, told
the court that he was not going to stand in the way of Mr Vorster's
argument. Without much ado the application
is hereby granted. Mr
Puckrin also brought an application for the consolidation of the two
applications. There was another application
by the respondent to
strike out paragraphs 8 and 17 of the applicant's replying affidavit
in the condonation application. I do
not deem it necessary to be
detained by the said application as the decision I have arrived at
did not take the said paragraphs
into account.
THE
FIRST APPLICATION
[4]
By an amended notice of motion issued by the registrar of this Court
the applicant seeks in this first matter an order in terms
of which
the respondent was ordered to pay the applicant's costs of the first
application including costs consequent upon the employment
of two
counsel. The applicant is a company with limited liability registered
as such in terms of the company statutes of this country
and conducts
business of manufacture in this country of certain cosmetic products
which are excisable in terms of part 2 of section
B of Schedule 1 of
the provisions of the Act. The respondent is an organ of State
charged with the administration of the provisions
of the Act
including the interpretation of the Schedules to the Act.
[5]
On 17 January 2006 and 9 January 2007 the respondent conducted
inspections at the premises of the applicant's predecessors,
Forever
Young. Such inspections were followed by audits during which the
respondent requested the records of all of Forever Youngs'
sales made
in the period commencing on 1 January 2004 to 31 December 2005.
Alleging that Forever Young had underpaid the
ad valorem
excise
duty and furthermore that there appeared to be a contravention of s.
69 of the Act, read with Rule 69.01, in a letter dated
19 January
2007, the respondent issued a notice of intention to raise a debt. It
was stated furthermore in the said letter that
from a schedule that
had been attached to the said notice, there was excise duty shortfall
in the sum of R1, 299, 714.78. With
interest and penalty imposed in
terms of s. 91 of the Act, the total amount payable came up to R1,
897, 583.48. Forever Young was
requested to make submissions to the
respondent why the amount so assessed should not be payable. It is
contended by the applicant
that the respondent had not, in the said
notice, furnished Forever Young with any reasons why it had alleged
that there had been
a contravention of the provisions of the Act nor
how the respondent had come to the conclusion that there had been an
excise duty
under payment.
[6]
On 11 July 2007, Forever Young received a second notice of intention
to raise a debt. The second notice of intent was for the
audit period
1 July 2006 to 31 December 2006. The amount considered to have been
underpaid by Forever Young by the respondent was
the sum of R734,
498.00 and, including interest and penalty, the total assessment was
R995, 247.00. No reasons were furnished for
the misconduct nor for
the conclusions arrived at by the respondent. Accordingly the total
assessment in respect of the two notices
of intent was R2, 892,
830.48. The respondent eventually furnished its reasons during the
exchange of correspondence between the
Forever Young's attorneys and
the respondent's attorneys and that was done in particular on 30 July
2008.
[7]
In a letter dated 22 September 2008 the respondent confirmed the
amount set out in the two aforementioned notices of intent
to raise
the debt and stated that the duty should be brought to account. In
the said letter the respondent furnished the following
reasons:
''A 25% discount was granted to
their clients which are NOT ALLOWED in terms of section 69.
In terms of Rule 69.01(a)(i)(c)
which was published on 06 September 2006 in the Government Gazette
NO. 23801 the 55% is the only
discount granted by the Commissioner.
Your client however did not adhere
to these in that they went further and gave their customers an extra
25% thus claiming more than
55% from the Commissioner. The ad valorem
excise duty must be calculated on the selling price and the 25%
discount granted to you're
their client should not be considered when
calculating ad valorem excise duty.
Rule 69.01 provides as follows:
(b) that all particulars in respect
of any discount, credit or any other information which relates to the
invoiced price of the
goods reflected on such invoice shall be fully
and completely set out on such invoice which invoice shall indicate
the full and
final price of such goods.
Therefore your client did not
adhere to the provisions of Rule 69.01 of the Customs and Excise Act.
The inspection was then followed by
an Audit of your client's books on 01June 2006 whereby we audited
your client's books from a
period of 01 January 2004 to 31 December
2005.
AUDIT RESULTS WERE AS FOLLOWS
The audit which was conducted for
the period 01 January 2004 to 31 December 2005 resulted in an
underpayment amounting to R1, 891,
583.00.
EXPLANATION
The underpayment identified during
audit was due to the 25% deduction which was granted toyour client's
customers.
The audit which was conducted for
the period 01 January 2006 to 31 December 2006 resulted in an
underpayment amounting to R995,
247.00
EXPLANATION
The underpayment of R995, 247.00
was identified by the very same operation which took place in the
above explanation."
[8]
Eventually undercover of a letter dated 20 May 2009, the respondent
furnished the schedules reflecting the calculations that
had led to
the amounts which the respondent considered as underpayments. In the
same letter dated 20 May 2009 the respondent pointed
out that the
final letter of demand would follow shortly thereafter.
[9]
On 7 July 2010 following the submissions that the applicant's
attorneys had made, the respondent directed a letter to the
applicant's
attorneys. The letter stated, among others, that:
"This office is convinced that
after due consideration of your representation, Rule 69.01(a)(i) of
the Customs and Excise Act
91 of 1964 has been contravened in that
deductions (commissions) amounting to 25% from the invoice price was
granted to Forever
Young's agents (clients) which in terms of Rule
69.01 is not allowed."
A
demand was made in the said letter that the total due must be brought
to account on/or before 30 July 2010 at the office of the
Controller,
on failure of which the matter would be referred to the respondent's
debt collectors for further attention.
[10]
On 2 September 2010, in anticipation of challenging the respondent's
determinations and the consequent debt by following internal

administrative appeal and in accordance with the policy of the
respondent of "pay-now-argue-later", the applicant paid
a
sum of R500, 000.00 to the respondent.
[11]
On 14 September 2010 the applicant noted an internal appeal against
the decisions of the respondent. In a letter by the respondent
dated
the 4 May 2011, the applicant was informed that its appeal against
the decisions of the respondent were unsuccessful. The
applicant was
invited to submit to the respondent a fully completed DA52 and any
necessary annexure within 30 days from the date
of the said letter
for the matter to be taken through the Alternative Dispute Resolution
(ADR) in terms of s 77 of the Act.
[12]
On 14 October 2011 the applicant has served the respondent with a
notice in terms of s 96(1)(a) of the Act of its intention
to
institute legal proceedings. On 14 December 2011, the applicant
augmented its ground of appeal. On 2 April 2012 the applicant

launched its first application. In the original notice of motion, the
applicant sought certain declaratory and compelling orders.
The
papers are not clear as to the date on which the amended notice of
motion was served. What is clear though is that it was ready
by the
31 March 2012 to be served. I am prepared to accept that the amended
notice of motion was part of the papers served on the
respondent. On
26 April 2012 the respondent delivered its notice of intention to
oppose the first application. On 6 July 2012 the
respondent withdrew
his determinations and his letter of demand. The effect of such a
withdrawal was that the determinations made
by the respondent and the
debt that constituted the target of the applicant's appeal fell away.
The reason for proceeding with
the appeal disintegrated with the
respondent's withdrawal of his determinations and letter of demand.
[13]
On 13 July 2012 the respondent delivered its answering affidavit
which, according to the respondent, raised only technical
issues. In
the said answering affidavit, deposed to by one Marlese Booysen
(Booysen), a post clearance inspector in the respondent's
office,
submitted that the issues relating to the relief sought by the
applicant in prayers 1, 2 and 3 of the notice of motion,
had become
academic by reason of the fact that the relevant letters of
assessment (demands) and the value determination upon which
they were
based were withdrawn on 6 July 2012. In the last paragraph of the
said answering affidavit the said Booysen stated that:
''As far as the costs are
concerned, the respondent tenders the cost of this application up to
and including the date of "Annexure
F being 6 July 2012. Any
further cost which may be incurred thereafter ought to be bome by the
applicant.
"
For record purposes Annexure "F"
was a letter dated 6 July 2012 written by the respondent to the
applicant's attorneys
of record. It reads as follows:
"In order to address the
representations made by you in the notice delivered in terms of the
provisions of section 96 of the
Customs and Excise Act, No. 91 of
1964 ("the Customs Act") as well as to investigate and
provide you with an opportunity
to address certain additional facts
which came to light in Notice of Motion read with the affidavits
deposed to by Ernest Jacques
Du Toit and Renette Josling filed in
case number 18632112, I hereby withdraw my letters of assessment
(demands) dated 22
September 2008, 7 October 2008, and 7 July
2010 in terms of the provisions of section 3(2) of the Customs Act.
Yours sincerely
Commissioner of South African
Revenue Services"
[14]
Despite the fact that he had withdrawn the value determination and
the debt, the respondent still refused or neglected or failed
to
refund the amount of RS00,000.00 that the applicant had paid in terms
of the respondent's "pay-now-argue-later'' policy.
Still the
respondent gave no reasons why he failed or neglected or refused to
refund the said amount within a reasonable time after
6 July 2012. To
exacerbate matters, the respondent failed to pay any interest on the
said amount. It is the applicant's case that
it was the respondent's
refusal to refund the said amount of R500, 000.00 that led to the
launch of the proceedings in the second
application. The applicant
states that the respondent waited until the applicant had brought the
second application before tendering
payment of the refund. The
respondent refunded the said sum on 23 September 2015 according to
the applicant's version or on 25
September 2015, according to the
respondent's version but still failed to pay interest on the said
amount.
THE
SECOND APPLICATION
[15]
In the second application, the applicant sought the following order
against the respondent:
"1. Directing the respondent
to pay the amount of RSOO, 000.00 which the applicant paid to the
respondent under protest on
10 September 2010, together
with
interest thereon, at the prescribed rate of interest, from 6 July
2012 to date of payment,·
2. Declaring that the applicant has
fully discharged its liability to the respondent in the respect of ad
valorem excise duties
for the period 1 January 2014 to 31 December
2016; and
3. That the applicant be ordered to
pay the cost of this application, including the cost of two
counsel,·and
4. Further and alternative relief."
[16]
The applicant contends that as the result of the withdrawal of the
letters of demand and the determination, referring to the
first
application, the relief sought in the pending litigation has
essentially become academic and the payment of R500, 000.00
which was
made on 2 September 2010 by the applicant to the respondent was made
sine causa
and falls to be repaid by the respondent to the
applicant. Ever since the withdrawal of the letters of demand on 6
July 2012 and
despite further considerations of documents by the
respondents no additional letters of demand or determination have
been made
by the respondent.
[17]
The withdrawal of the letters of demand occurred on 6 July 2012,
three months after the founding affidavit in the pending litigation

was served and 5 days before the applicant's application was due to
be heard in the unopposed motion court. The consequence of
the
respondent's withdrawal of the letters of demand are, among others,
that the sum of R500, 000.00 which was demanded by the
respondent on
the strength of the decision contained in the letter of demand and
paid by the applicant on 2 September 2010 under
protest was not due
to the respondent and stands to be refunded to the respondent. The
applicant submits on that basis that the
R500, 000.00 should be
repaid to it by the respondent as there is no legal justification for
its retention by the respondent.
[18]
While Mr. Puckrin, counsel for the applicant, submitted that the two
applications should be consolidated, as one application
and that an
order of costs be made accordingly, Mr. Vorster, counsel for the
respondent, on the other hand, submitted though that
the two
applications should be kept apart and an order in each one of them be
made by this Court. He argued that keeping the matters
apart will
make the matters easy for the taxing master. While the Court will
accept Mr. Puckrin's application for the consolidation
of the two
matters which was merely an ad-hoc solution for the purposes of
hearing the matters, the Court will accept Mr. Vorster's
proposition
that separate orders be made in respect of each of the matters as a
plausible solution for purposes of taxation.
[19]
Now, as a starting point, the respondent has conceded that he is
obliged to pay the applicant's costs of the two applications
and
interest on the said amount of R500,000.00. This, however, is a
qualified concession in respect of both the costs of the two

applications and interest on the said amount. With regard to the
costs that relate to the first application, the respondent is

prepared to pay such costs of the applicant's costs only up to and
including 6 July 2012, despite the fact that he filed a document

called an answering affidavit with numerous annexures after 6 July
2012; that costs incurred by either party after 6 July 2012
should be
borne by the applicant and that such costs should include the costs
of two counsel. The respondent proposition to pay
the costs of the
first application only up to 6 July 2012 is, in my view, not a
plausible one. The respondent, as I indicated earlier,
delivered an
answering affidavit after 6 July 2012 despite the fact that he
withdrew his determinations and a letter of demand
on 6 July 2012.
Surely it is only proper that he carries, among others, the costs of
the said answering affidavit. It is of supreme
importance to point
out that the applicant did not deliver any further papers after the
delivery of the answering affidavit. An
appropriate, in my view, is
that the respondent should bear the costs of the first application.
[20]
With regards to the second matter the respondent is prepared to pay
interest on the amount of R500,000.00 at the rate of 9.5%
per annum
reckoned from 26 May 2015, which is the date on which a copy of the
second application was served on him and 25 September
2015 which is
the date on which it is contended by the respondent that the amount
of R500,000.00 was refunded to the applicant;
the respondent is
prepared to pay the costs of the second application up to and
including 17 July 2015 and that the costs occasioned
to the
respondent by the prosecution of the application by the applicant
after 17 July 2015 should be paid by the applicant and
that such cost
should include the cost consequent upon the employment of two
counsel.
[21]
On the two issues raised in paragraph 3 supra, the applicant's view
is that the Court should grant an order in terms of which
the two
applications are consolidated; that the respondent is directed to pay
interest at the legal rate of interest in the said
sum of R500,
000.00 from 2 September 2010 to date of refund which is 23 September
2015; that the respondent should pay interest
on the unpaid interest
calculated from 24 September 2015 to date of payment. On the question
of cost the applicant's position is
that the respondent should carry
the legal cost incurred by the applicant in respect of both motion
proceedings including the cost
of two counsel.
[22]
The applicant does not accept the concession made by the respondent
in which the respondent accepted liability for the cost
incurred by
the applicant between 26 May 2015 to 6 July 2015 and from 26 May 2015
to 25 September 2015. Clearly the applicant does
not accept the
period over which interest is calculated by the respondent. Mr.
Puckrin relied on the provisions of s 1(1) of the
Prescribed Rate of
Interest Act 55 of 1975 ("the PRI Act"). The said s 1(1)
provides as follows:
"If a debt bears interest at
the rate at which the interest is to be calculated is not governed by
any other law or by an agreement
or a trade custom or in any other
manner, such interest shall be calculated at the rate contemplated in
(2)(a) as at the time when
such interest begins to run unless a court
of law, on the ground of special circumstances relating to that debt,
orders otherwise.
(2)(a) For the purposes of
subsection (1), the rate of interest is the repurchase rate as
determined from time to time by a South
African Reserve Bank, plus
3.5% per annum."
[23]
Furthermore he relied on the case of Lodhi 5 Properties Investments
CC and Others vs Firstrand Bank Limited
(2015) 3 ALL SA 32
(SCA) at
paragraph 23 where the Court had the following to say:
"On the question of interest
it seems to me that the appellant's argument misconceives the nature
of the interest sought here
-
that it was not based on the
enforcement of a contractual and undertaking but rather on Lodhi 5's
default It is trite that a party
which has been deprived of the use
of its capital for a period time has suffered a loss which, in the
normal cause of events, will
be compensated by an award of mora
interest. The term 'mora' simply means delay or default,·interest
a tempore morae constitutes
the damages that now naturally (without
the need to
place the debtor in mora) from the contract itself
by reason of a debtor having failed to perform a contractual
obligation within
the agreed time.
"
[24]
Finally Mr. Puckrin placed reliance on Crooks Brothers Limited vs
Regional Land Claims Commissioner for the province of Mpumalanga
and
Others
(2013) 2 ALL SA 1
(SCA) in particular the following passage
and submitted that the said case made a distinction between two types
of
mora
interest and
mora ex rae.
"When the contract fixes the
time for performance, mora (mora ex re) arises from the contract
itself and no demand (interpellatio)
is necessary to place the debtor
in mora. In contrast, where the contract does not contain an express
or tacit stipulation in regard
to the date when performance is due, a
demand (interpellatio) becomes necessary to put the debtor in mora.
This is referred to
as mora ex persona
...
the purpose of mora
interest is, therefore, to place the creditor in the position that he
or she would have been in had the debtor
performed in terms of the
undertaking. Here a demand (interpellatio) was necessary to place the
respondents in mora."
[25]
Quite clearly what the above passage mean is that there are two
different scenarios referred to in the passage. The first scenario
is
where a contract stipulates the time for performance and the second
scenario is where the contract does not fix performance
time. Where a
party is required to perform on an agreed date by the terms of the
contract such a party is automatically in
mora
if he fails to
do so. In this scenario, interest would become due and payable
immediately when the party that is obliged to pay
fails to pay and
becomes in
mora.
This first scenario takes place where time in
a contract is of essence.
[26]
The passages above fully explain the second scenario. Where the
contract contains no express or tacit stipulation with regard
to the
time of performance, a demand becomes necessary to put the debtor in
mora.
This principle applies in all instances even where there
no contract is involved. In order to put a party that has to perform
in
mora,
it is necessary that a demand in one way or the other
be made. Where there is no contract, like the instant case, it is
important
that a demand to perform be made by the party in order to
put the other party in
mora.
This is the approach adopted by
Mr. Vorster, counsel for the respondent. This seems to be the law in
this country. First of all
it is clear that the case of Crooks
Brothers vs Regional Land Claims
supra
demonstrates that
point. In my view, on 6 July 2012, when the respondent abandoned its
assessment the respondent became the debtor
in respect of the sum of
R500,000.00 while at the same time the applicant became its creditor.
The respondent became obliged to
refund the same amount but
unfortunately no time for such refund was fixed. It is a requirement
of
mora
that the debtor, in this case the respondent, should
have failed to refund the money timeously. The mere fact that the sum
of R500,
000.00 was due by the respondent to the applicant, did not
necessarily mean that the respondent was in
mora
for failing
to refund the said sum between 6 July 2012 and 25 May 2015. Timeous
performance presupposes certainty as the time for
performance.
Accordingly the respondent could only fall into
mora
when a
definite time for performance had been fixed by the applicant making
a demand. If the debtor could not have known when to
perform there is
no
mora.
[27]
The case of CIR v First National Industrial Bank Limited 1990(3) SA
641 AD on which Mr Vorster relied in support of his argument
best
illustrates that
mora
interest
would
only start to run when payment was duly demanded when it it had the
following to say at page 654E-F:
"Leaving aside other perhaps
contentious aspects of that judgment (cf De Vos
1968
THRHR
111)
, one principle it does reaffirm is that mora in respect of a
liquidated
money debt would run from the date when payment was
duly demanded (f 2850-G, 2878)."
[28]
Mr. Puckrin argued that demand for payment of money was made by a
compromise or by an appeal lodged by the applicant against
the
decisions of the respondent in terms of s 96 of the Act. For two
reasons there is no merit in this argument. The first is that

compromise, as Mr. Puckrin argued, did not contain a demand for the
refund of the said amount nor did it result in an agreement
between
the parties for the refund of the said amount. The second reason is
that the noting of an appeal in terms of s 96(1) of
the Act did not
constitute a demand for payment of the required money. I am prepared
to accept that the only valid demand to the
respondent to refund the
money was the second application. A copy of the said application
served by the sheriff on the respondent
on 26 May 2015 constituted,
in my view, a valid demand by the applicant to the respondent for the
refund of the aforementioned
amount. The demand for refund for the
sum of R500, 000.00 is contained in the first prayer of the relevant
notice of motion. The
respondent only came into
mora
on 26 May
2015 which is the date on which a copy of the second application was
served on him and continued to be in
mora
up to 23 or 25
September 2015, which was a date on which the said amount was repaid
by the respondent to the applicant.
[29]
Consequently I am of the view that no interest was recoverable by the
applicant from the respondent before refund of the said
amount of
R500, 000.00 was demanded by the applicant from the respondent.
Accordingly
the following order is made:
In
respect of case number 18632/12:
1.
The respondent is hereby ordered to pay the costs of the application
which costs shall include the costs consequent upon the
employment of
two counsel.
In
respect of case number 36127/2015
1. The respondent is hereby ordered to
pay interest on the amount of R500, 000.00 at the legal rate from 26
May 2015 to 23 September
2015.
2. The respondent is hereby ordered to
pay the costs of this application up to 17 July 2015. Such costs
shall include the costs
consequent upon the employment of two
counsel.
3. The costs occasioned to the
respondent by the prosecution of the application by the applicant
after 17 July 2015 are to be paid
by the applicant, such costs to
include the cost of two counsel where so employed.
__________________
P.
M. MABUSE
JUDGE
OF THE HIGH COURT
Appearances:
Counsel
for the applicant:
Adv. C Puckrin (SC)
Adv. N. Nxumalo
Instructed
by:

Werksmans Attorneys
Counsel
for the respondent:
Adv. JP Vorster (SC)
Adv. L Sigogo
Instructed
by:

The State Attorney
Date
Heard:

6 June 2016
Date
of Judgment:
10 June 2016