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[2007] ZASCA 168
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Shaikh v Standard Bank of SA Ltd. and Another (27/07) [2007] ZASCA 168; [2008] 2 All SA 159 (SCA); 2008 (2) SA 622 (SCA); 70 SATC 21 (29 November 2007)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
CASE NO
: 27/07
REPORTABLE
In the matter between :
MOHAMMED AMIN YUSUF
SHAIKH
................................
APPELLANT
and
STANDARD BANK OF SA
LIMITED
................................
FIRST
RESPONDENT
SOUTH AFRICAN REVENUE SERVICES
................................
SECOND
RESPONDENT
______________________________________________________________________________
BEFORE: NAVSA, NUGENT, JAFTA JJA HURT and MHLANTLA AJJA
HEARD: 12 NOVEMBER 2007
DELIVERED: 29 NOVEMBER 2007
SUMMARY: The erroneous reference to a statutory provision or
failure to refer to the applicable section does not render a notice
for
recovery of Vat by SARS invalid.
NEUTRAL CITATION: This judgment may be referred to as
Shaikh
v Standard Bank
[2007] SCA 168 (RSA)
______________________________________________________________________________
J U D G M E N T
______________________________________________________________________________
MHLANTLA AJA
MHLANTLA AJA
:
[1] This is an appeal with the leave of the court below
against a decision of Lopes AJ (sitting in the Durban High Court) in
which
he dismissed with costs two points
in
limine
raised by the appellant, Mr Mohamed
Amin Yusuf Shaikh (‘Shaikh’).
[2] The issue in this appeal is whether the South
African Revenue Services (‘SARS’) was entitled to recover
value added
tax (‘Vat’) through an agent, as statutorily
defined, on imported goods under a notice that referred only to
s 114A
of the Customs and Excise Act 91 of 1964 (‘the
Customs Act’).There are related provisions of the Customs Act
and the
Value Added Tax Act 89 of 1991 (‘the Vat Act’)
which will be examined in due course.
[3] It is necessary to commence by setting out the
relevant legislation. The Customs Act empowers SARS to levy customs
and excise
duties on imported goods and s 114A provides a
particular method of recovering such duties. It provides:
‘
The Commissioner may, if he thinks it
necessary, declare any person to be the agent of any other person,
and the person so declared
an agent –
shall for the purposes of this Act
be the agent of such other person in respect of the payment of any
amount of duty, interest,
fine, penalty or forfeiture payable by
such other person under this Act; and
may be required to make payment of
such amount from any moneys which may be held by him or her for or
be due by him or her to the
person whose agent he or she has been
declared to be:
Provided that a person so declared an
agent who, is unable to comply with a requirement of the notice of
appointment as agent, must
advise the Commissioner in writing of the
reasons for not complying with that notice within the period
specified in the notice.’
[4] Section 103 of the Customs Act imposes vicarious
liability on managers of corporate entities for any liability
incurred by such
entities while under the management of the manager
concerned. It provides:
‘
For the purposes of
this Act any reference to a person shall be deemed to include a
reference to a company, close corporation, co-operative
society,
firm, partnership, statutory body or club and in the event of a
contravention of or non-compliance with this Act or the
incurring of
any liability under this Act by any company, close corporation,
co-operative society, firm, partnership, statutory body
or club any
person having the management of any premises or business in or in
connection with which the contravention or non-compliance
took place,
or the liability was incurred may be charged with the relevant
offence and shall be liable to any penalties provided
therefor and
shall be liable in respect of any liability so incurred.’
[5] The VAT Act authorises SARS to collect Vat in
general and in relation to goods imported into the Republic. Section
47 of this
Act, like s 114A of the Customs Act, prescribes a
particular procedure which may be followed by SARS in collecting Vat.
It reads
as follows:
‘
The Commissioner may, if he thinks it
necessary, declare any person to be the agent of any other person,
and the person so declared
an agent shall for the purposes of this
Act be the agent of such other person in respect of the payment of
any amount of tax, additional
tax, penalty or interest payable by
such other person under this Act and may be required to make payment
of such amount from any
moneys which may be held by him for or be due
by him to the person whose agent he has been declared to be . . . .’
[6] Section 13 of the VAT Act incorporates with the
necessary changes the provisions of the Customs Act pertaining to the
recovery
of duty. Section 13(6) provides:
‘
(6) Subject to this
Act, the provisions of the Customs and Excise Act relating to the
importation, transit, coastwise carriage and
clearance of goods and
the payment and recovery of duty shall
mutatis
mutandis
apply as if enacted in this Act,
whether or not the said provisions apply for the purposes of any duty
levied in terms of the Customs
and Excise Act.’
[7] The facts of this case are common cause. In January
2004 Shaikh was a manager in the wholesale business of a close
corporation
called Nexor 188 CC, trading as Classic Distributing
Company (‘Classic’) at 28 Linze Road, Durban. The sole
member
of Classic was Shaikh’s former wife, Ms Marianne Ward.
Classic traded in shoes which were imported into South Africa through
Durban Harbour. As expected, SARS charged duty and Vat on shoes
imported into the country by Classic. The value of goods is used
as a
basis for calculating the amount of customs duty due to SARS.
Therefore it is incumbent upon the importer to declare the true
value
and this is usually done by submitting invoices to SARS.
[8] On 29 January 2004 customs officials including Mr
Younus Mansoor (‘Mansoor’), a post-clearance inspector
specialist
stationed at the Durban’s customs office, called at
Classic’s business premises to conduct a search. During the
search
they discovered documents which proved that Classic had
underdeclared the value of the shoes it had imported by submitting
false
invoices reflecting an amount less than the true value. Mansoor
and his team noticed that there were duplicate invoices relating
to
the same consignment and that Classic had submitted ones reflecting
the lesser value.
[9] On 16 February 2004 Mansoor, on behalf of SARS,
demanded payment from Classic of the difference between the amount of
duty and
Vat it had already paid (the understated value) and the sum
calculated on the basis of the actual value of imported shoes. Shaikh
met Mansoor and raised minor queries but accepted the correctness of
Mansoor’s calculations. Classic failed to pay the amount
claimed and SARS turned to Shaikh for payment, invoking the
provisions of s 103 of the Customs Act. When he too failed to
pay
SARS sought to recover the duties and Vat due from him by means
of the procedure contemplated in s 114A of the Customs Act and
s
47 of the VAT Act.
[10] Acting in terms of s 114A SARS appointed the
Standard Bank of SA Limited (‘the bank’) at which Shaikh
had an
account as his agent and instructed the bank to pay the sum of
R1 245 724.33 to it. This amount represented customs duty,
Vat, forfeiture and interest charges. The first notice of appointment
was issued on 28 March 2006 and reads as follows:
‘
APPOINTMENT AS AGENT: MR M.A.Y. SHAIKH :
YOUNG AMERICAN
The abovementioned is indebted to this department for Customs Duty,
Vat, Forfeiture and Interest of R1 245 724.33.
In terms of s 114A of the Customs and Excise Act 91 of 1964, as
amended, the Commissioner for the South African Revenue Services
is
empowered to appoint an agent who may be in custody or control of
income, money etc of the client, to hold such money or assets
for the
payment of Duty, VAT, Forfeiture, fine, penalty and interest upon the
request of the department.
In terms of this section [the] Commissioner appoint[s] you as agent
and requests that you hold and not dispose of any monies or assets,
whether capital or interest to the client or to any other person. You
are requested to pay such money referred to above to the Commissioner
by close of business tomorrow 29 March 2006. If you are unable to
comply with this notice you must advise me in writing by 30 March
2006, your reasons for not complying.’
The bank duly complied and paid the sum of R699 920
being the only funds available in Shaik’s account to SARS.
[11] On 8 May 2006 SARS issued a second notice in almost
identical terms for the payment of the sum of R539 993.29. The bank
again
complied.
[12] Shaikh thereafter launched an application in the
court below challenging the validity of the notices on the basis that
they were
ultra vires
.
The bank did not oppose the application and gave notice that it would
abide the decision of the court. It adopted the same attitude
on
appeal.
[13] At the hearing of the matter Lopes AJ was asked to
decide points raised by Shaikh separately from the other issues which
were
deferred for later consideration. The first question was whether
the provisions of the Customs Act authorised the Commissioner to
appoint agents for the recovery of amounts relating to Vat. Allied to
this was the question of whether s 13(6) of VAT Act bestowed
such authority. The second was whether Shaikh had not incurred
liability for Vat in terms of s 103 of the Customs Act. The
claims
can only arise, contended Shaikh, under the Vat Act. It was
contended that a notice in terms of s 47 of the VAT Act ought to
have been issued rather than the notice which relied on s 114A
of the Customs Act. The court below decided these questions in
favour
of SARS and postponed the application
sine
die
.
[14] Before us the parties were agreed that the sole
issue for determination which is dispositive of the appeal, was
whether SARS
was entitled to rely on the notices citing s 114A
to recover Vat.
[15] Counsel for the appellant conceded, correctly in my
view, that Shaikh was liable for Classic’s debts within the
parameters
of s 103 of the Customs Act. Whilst conceding that
Shaikh was liable for Vat and that SARS was entitled to claim it, he
argued
that SARS could not invoke s 114A for the recovery of Vat
because that section (114A) was introduced in 2003, long after the
VAT Act was promulgated. It will be recalled that s 47 contains
provisions identical to s 114A of the Customs Act. It was
contended
therefore that when s 114A was introduced the
Legislature could not, so it was argued, have intended to incorporate
s 114A into
the VAT Act. Accordingly SARS could not, so it was
submitted in conclusion, claim Vat under a notice issued in terms of
s 114A. SARS
could only do so under a notice issued in terms of s 47
of the VAT Act.
[16] The real issue here is not whether s 13(6)
incorporates s 114A into the VAT Act but whether SARS is
entitled to claim Vat
under a notice which refers only to s 114A. Put
differently, does the reference to that section render the recovery
of Vat invalid
where SARS is empowered to recover Vat albeit by a
section in another statute?
[17] This question was answered by this court in
Howick
District Landowners Association v Umngeni Municipality
1
where Cameron JA stated:
‘
[W]here an empowering statute does not
require that the provision in terms of which a power is exercised be
expressly specified, the
decision-maker need not mention it. Provided
moreover that the enabling statute grants the power sought to be
exercised, the fact
that the decision-maker mentions the wrong
provision does not invalidate the legislative or administrative act.
The landowners argued that there is “considerable doubt”
about the validity of [
Latib v The Adminsistrator, Transvaal
1969 (3) SA 186
(T)] in the light of the constitutional dispensation
and, in particular, its emphasis on the principle of legality. As
authority,
they referred to the decision of the CC in [
Minister of
Education v Harris
2001 (4) SA 1297
(CC)]. But this seems to me
to misinterpret both the doctrine and the decision.
Latib
does
not license unauthorised legislative or administrative acts. It
licenses acts when authority for them exists, and when the failure
expressly or accurately to invoke their source is immaterial to their
due exercise. As Baxter puts it:
“
If
the authority is stated incorrectly, the action is not thereby
invalidated so long as authority for the action does exist and the
conditions for its exercise have been observed.”
’
[18] In my view the principle in
Howick
applies equally to the present case. When issuing the
impugned notices, SARS erroneously referred only to s 114A and
omitted
to refer to s 47 of the VAT Act. The reference to s 114A
was in order because SARS also sought to collect duty which arose
under the Customs Act. To this extent Shaikh does not challenge the
validity of the notices. Instead his complaint is that the notices
do
not also refer to s 47. Consequently, he contends, Vat could not
be recovered in terms of those notices. The question that
arises is
whether it was mandatory for them to refer to s 47. The VAT Act
does not prescribe that reference to the section be
made in a notice
issued under authority of s 47. The omission therefore did not
affect the validity of the notices insofar as
they related to the
collection of Vat. SARS unquestionably had authority to issue the
notices for that purpose. To conclude otherwise
would be to elevate
form above substance.
[19] It is worth noting that Counsel for the appellant
conceded that there would have been no problem if the Commissioner
had not
mentioned any provisions in the notices and that under those
circumstances the agent would have been obliged to pay. It follows
that
the appeal must fail.
[20] In the result the appeal is dismissed with costs.
_________________________
N Z MHLANTLA
ACTING JUDGE OF APPEAL
CONCUR
:
NAVSA
JA)
NUGENT
JA)
JAFTA
JA)
HURT
AJA)
1
2007
(1) SA 206
(SCA) paras 19 and 20. See also
Administrateur,
Transvaal v Quid Pro Quo Eiendoms
Maatskappy
(Edms) Bpk
1977 (4) SA 829
(A).