South African Revenue Services (Customs & Excise) v Desmonds Clearing and Forwarding Agents CC (039/05) [2006] ZASCA 9; 2006 (4) SA 284 (SCA) (16 March 2006)

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South African Revenue Services (Customs & Excise) v Desmonds Clearing and Forwarding Agents CC (039/05) [2006] ZASCA 9; 2006 (4) SA 284 (SCA); 68 SATC 181 (16 March 2006)

REPUBLIC
OF SOUTH AFRICA
THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
REPORTABLE
Case
number: 39/05
In
the matter between:
THE
SOUTH AFRICAN REVENUE SERVICES
(CUSTOMS
& EXCISE)
Appellant
and
DESMONDS
CLEARING AND
FORWARDING
AGENTS CC
Respondent
CORAM
:
MPATI
DP, STREICHER, NUGENT, CLOETE JJA and
CACHALIA
AJA
HEARD
:
24
FEBRUARY 2006
DELIVERED
:
16
MARCH 2006
Summary:
Revenue –
customs and excise – goods in transit – temporary storage thereof
within Republic not amounting to diversion of goods
to destination
other than that declared on bill of entry in contravention of s
18(13) of Customs and Excise Act 91 of 1964.
Neutral citation:
This
judgment may be referred to as
South African Revenue Services v
Desmonds Clearing and Forwarding Agents CC [2006] SCA 10 (RSA)
_____________________________________________________________________
JUDGMENT
_____________________________________________________________________
MPATI
DP:
[1] The respondent is a
close corporation whose primary business is that of a clearing and
forwarding agent and a transporter of goods
in bond to countries
across our borders. It renders services mainly to clients in Zambia
and Zimbabwe, who import goods through
South African ports.
[2] Mashbury Motors (Pvt)
Ltd (Mashbury Motors), one of the respondent’s clients from Harare,
Zimbabwe, imported from Britain a
used truck tractor (the truck) and
a trailer loaded with four smaller trailers containing spares and
accessories. (I shall refer
to the items collectively as ‘the
imported goods’ and to the trailers and spares and accessories as
‘the trailers’.) The
imported goods were landed at Durban
harbour during April 2003.
[3] In
terms of sections 38 and 39 of the Customs and Excise Act 91 of 1964
(the Act) an importer of goods landed at a South African
port, or his
agent, is required to submit to the Controller
1
a bill of entry in a prescribed form within a prescribed period after
the goods have been so landed, which contains, inter alia,
particulars of the goods in question and the purpose for which they
are being entered. Unless the Controller allows a deferment,
the
duties due on the goods must be paid. Thereafter a release order is
issued. If goods destined for a neighbouring country are
not entered
for storage in a customs and excise warehouse for later removal upon
due entry for export, they may be entered for direct
removal in bond
(s 18). A person who enters any goods for direct removal in bond and
so removes such goods, is liable for duty on
them (s 18(2)).
However, such liability ceases upon proof that the goods, if they
were destined for a place outside the common customs
area
2
,
have been taken out of that area or have been accounted for in the
country of destination (s 18(3)(b)).
[4] In the present case
the bill of entry describes the imported goods as ‘BREAK BULK
CARGO’ and ‘RIGHT-HAND DRIVE UNIT TO BE
REMOVED ON OWN WHEELS’.
The purpose code ‘RIT’ entered on the bill of entry indicates
that the imported goods were intended
for ‘direct removal in bond
in transit to a destination outside the common customs area’ (Rule
18.01 (a)(ii)(bb) of the rules
promulgated under the Act, quoted in
para 17 below).
[5] Section 18(13)(a) of
the Act prohibits the diversion, without the permission of the
Commissioner, of ‘any goods removed in bond
to a destination other
than the destination declared on entry for removal in bond’ or the
delivery of such goods in the Republic
‘except into the control of
the department at the place of destination’. The issue in this
appeal is whether the temporary storage
of the trailers - which had
been uncoupled from the truck - at certain premises within the
country, constituted a diversion to a
destination other than that
declared on entry, as contemplated by the section.
[6]
Section 87(1) provides, inter alia, that any goods ‘imported, . .
. removed or otherwise dealt with contrary to this Act .
. . shall be
liable to forfeiture wheresoever and in possession of whomsoever
found . . . ‘. An officer
3
,
magistrate or member of the police force may detain goods at any
place for purposes of establishing whether such goods are liable
to
forfeiture (s 88(1)).
In terms of rule 18A.10, read with
rule 18.15, the Controller may allow any imported second-hand power
driven vehicle to be removed
in bond on compliance with certain
requirements. One such requirement is that the bill of entry must
reflect the temporary permit
number issued by the licensing authority
for the purpose of driving the vehicle to the customs and excise
border post where it will
exit the Republic. Delivery to the
Controller of a copy of the bill of entry endorsed accordingly by
officials of the appellant
at the border will constitute proof that
the goods have exited the Republic (rule 18A.10(c)(iii)).
[7] The
declared destination of the imported goods was Harare, Zimbabwe, and
as indicated on the bill of entry the unit was to be
removed ‘on
own wheels’. The trailers were to be hauled by the truck, and to
facilitate this the respondent applied for, and
obtained, a temporary
permit from the licensing authority. A cross-border permit was also
issued in favour of the respondent - on
12 May 2003 - for the
conveyance of the trailers through the Beit Bridge border post
between the Republic and Zimbabwe, ‘to points
situated within
Zimbabwe’. On 13 May 2003, and as required under rule
18A.10(a)(iv), an officer
4
examined the imported goods and the temporary permit. He approved
the temporary permit and issued a certificate on which appears
the
endorsement ‘Export may proceed’.
[8] It is not in dispute
that on 27 May 2003 Mr Gregory Mark Munisami, an official of the
appellant, received information from a fellow
official that a number
of imported vehicles ‘which had been imported to South Africa for
purposes of being exported outside the
common customs area’ were
parked on the premises of Sensation Transport in Springfield Park,
Durban. Upon visiting Sensation Transport
on 27 May 2003 Munisami
and his two colleagues discovered that the trailers were also parked
there. They established, through enquiries,
that the trailers were
under the control of one Kevin Mudaly, the owner of a business known
as Truck and Car Repairs. He, in turn,
advised them that he was
carrying out mechanical repairs to the trailers so as to obtain a
certificate of roadworthiness from the
testing centre in Pinetown,
whereafter the trailers would be removed to Zimbabwe. Subsequent
enquiries from Mr Desmond Pillay (of
the respondent) revealed that
the truck had already been exported to Zimbabwe. Mr Pillay undertook
to provide the appellant with
the requisite proof of export.
[9] It is common cause
that on 28 May 2003 the appellant issued a detention notice in
respect of the trailers in terms of s 88(1)(a),
read with s 87 of the
Act, for purposes of establishing whether they were liable to
forfeiture. On 4 June 2003 the appellant wrote
to the respondent
advising that a contravention of s 18(13) of the Act had been noted,
and also levying a penalty (s 91(1)(a)(iii))
of R40 838 and a
‘forfeiture amount’ (s 93) equal to the penalty. A letter from
the respondent’s attorneys dated 9 June 2003
giving an explanation
as to why the truck had left the trailers behind did not serve to
persuade the appellant to move from its stance,
which was that the
trailers had been diverted without the permission of the
Commissioner. In a letter dated 12 June 2003 the appellant
told the
respondent’s attorneys that the respondent ‘should have sought
the necessary permission from the Commissioner to divert
the goods as
soon as they realized that same could not be avoided’.
Consequently, the respondent instituted motion proceedings
in the
Durban High Court for an order declaring that the temporary storage
of the trailers at the premises of Sensation Transport
was not a
diversion as contemplated by s 18(13) of the Act, and directing the
appellant to release and hand over the trailers to
the respondent.
The court
a quo
(Hugo J) granted the order sought. The
appellant now appeals against that order with leave of the court
below.
[10] In its founding
papers the respondent alleges that shortly after the truck had been
examined by an official of the appellant
(as referred to in para 7
above) and after it had left the appellant’s premises it
encountered difficulties; that the gearbox
showed signs of mechanical
failure and it became evident to the respondent’s employees that
the truck would not be able to haul
the trailers all the way to
Zimbabwe; that it required repairs, and that the trailers were
accordingly hauled to, and left, at the
premises of Sensation
Transport ‘where they awaited the repairs of the truck [prior to
being moved to their] final destination’.
[11] These allegations
stand undisputed. The only averment made on behalf of the appellant
in the answering affidavit is that no
permission had been granted to
the respondent to effect repairs to the truck and that ‘such
conduct is in contravention of section
18A(10)(b)(ii) and thereby
constituted a “diversion” in terms of section 18(13) of the Act’.
The reference to s 18A(10)(b)(ii)
was obviously intended to be a
reference to rule 18A.10(b)(ii). But that subrule merely provides
that a vehicle, in respect of which
no temporary permit has been
issued for driving it to the customs and excise border post where it
will exit the Republic, must be
transported by a licensed remover of
goods in bond. In a document headed ‘Customs Policy and Process’,
dated 20 August 2003,
it is stated (in para 4 thereof) that ‘Vehicles
requiring repairs or servicing must be removed as contemplated in
Rule 18A.10(b)(ii)’.
This, of course, might very well have applied
to the truck. But we are now concerned with the trailers and whether
they had been
diverted to a destination other than that declared on
entry for removal in bond.
[12] In a further
affidavit filed on behalf of the appellant it is alleged that the
respondent had not been totally frank with the
appellant; that
‘there is considerable cause for concern as to what its true
intention was in relation to the truck and trailers’,
and that the
‘diversion’ of the truck to Johannesburg – where it was
apparently repaired – and the trailers to Durban also
created some
cause for suspicion. The respondent has alleged, however, that it
had always been its intention to remove in bond the
truck, together
with the trailers, to their declared destination.
[13] In my view, the
appellant’s officials were clearly justified in conducting
investigations into the reasons for the presence
of the trailers on
the premises of Sensation Transport. The truck and trailers were
entered for removal in bond as a unit. The
officials were thus
entitled to issue a detention notice (s 88(1)(a)), for purposes of
establishing whether the imported goods had
been irregularly dealt
with and thus liable to forfeiture (s 87(1)). The question though,
is whether the further detention after
such investigations was
justified.
[14] The mere statement
by the respondent that its intention had always been to remove the
truck and trailers to their declared destination
is not enough.
Other factors relevant to the issue need to be considered.
Beckett
& Co Ltd v Union Government
1921 TPD 142
at 147. In my view,
the respondent (through its attorneys) gave a reasonable explanation
for the separation of the truck from the
trailers, which was that
‘the importer was of the opinion, based on the expert report of his
motor mechanic’ that due to mechanical
failure the truck ‘was not
capable’ of hauling the trailers to Zimbabwe. Consequently the
trailers had to be stored, temporarily,
at the premises of Sensation
Transport until alternative arrangements had been made. Moreover, it
has also not been suggested by
the appellant that the trailers had
been unpacked or in any way tampered with. The high-water-mark of
the appellant’s case is
that the trailers should have been moved
for storage in a customs and excise warehouse. It is true that the
premises of Sensation
Transport were not a licensed warehouse for
storage of goods in bond, but neither the Act nor the Rules
promulgated in terms of it
required goods in bond being hauled by a
vehicle licensed to do so, must be stored in a bonded warehouse in
the event of the vehicle
breaking down en route to its declared
destination. And it cannot be inferred from the fact that the truck
might have been repaired
contrary to the appellant’s policy (set
out in the document quoted in para 11 above), that the respondent
intended to divert the
trailers to a destination other than the one
declared on entry for removal in bond.
[15] The appellant has
annexed to its answering affidavit a copy of a facsimile from the
importer, Mashbury Motors, dated 2 June 2003
and addressed to the
respondent, in which the following appears:
‘
. . . Unfortunately
this unit (the truck) developed gear changing problems when leaving
Durban and the driver thought it wise to proceed
to Zimbabwe without
its load to have the vehicle checked and then return later to collect
the trailers.
The
truck broke down en route to the border and had to be repaired. . .
. This vehicle has now been repaired and is on its way to
the
border. In view of the time delay a decision was made to export the
unit immediately without collecting the trailers.
We
would be very grateful if you could now arrange to have these
trailers delivered to Beit Bridge using another horse as soon as
possible.
.
. .’
The letter, which must
have been made available to the appellant’s officials during their
investigations, clearly shows that the
trailers had not been
‘diverted’ to a destination other than the one declared on entry,
but were still intended for removal to
the declared destination. The
fact that the cross-border permit had expired – it was valid from
12 May 2003 until 26 May 2003
– does not detract from such
intention.
[16] Section
18(13)(a) prohibits the diversion, without the permission of the
Commissioner, of goods removed in bond
to a destination
other than that declared on entry for removal in
bond
. The
words underlined are important and have been overlooked by the
appellant. The section does not proscribe a detour; it proscribes
a
deviation to another destination. ‘Destination’ is defined in
the Shorter Oxford English Dictionary as ‘the intended end
of a
journey or course’. A driver who, while transporting goods in
bond, deviates from the normal route between, say, Durban and
Harare,
for whatever reason, but who intends to continue with his journey,
does not make himself guilty of a contravention of s 18(13).
His
intended destination has not changed. Of course the extent of the
detour would be one of the factors which would be taken into
account
in deciding whether the section had been contravened, but it cannot
be concluded, merely by reason of the deviation, that
the goods have
been diverted to a destination other than that declared on entry for
removal in bond. The driver may yet intend to
reach the declared
destination. In the present matter there was insufficient evidence
produced by the appellant to rebut the prima
facie case made out by
the respondent that the trailers were only temporarily being kept in
Durban and that it remained the respondent’s
intention to export
them to their declared destination.
[17] Counsel for the
appellant submitted that goods entered for removal in bond in transit
to a destination outside the common customs
area must be removed
‘directly’ to such destination. By this counsel meant that the
goods should be kept on a direct route between
the place of
commencement and the customs and excise border post where such goods
are to exit the Republic. For this submission
counsel relied on rule
18.01(a)(ii)(bb), which reads:
‘
Goods entered for
removal in bond under the provisions of section 18(1) shall –
if imported, and -
. . .
(bb) intended for
direct removal in bond in transit to a destination outside the
common customs area, be
entered on a form DA500, purpose code RIT;
. . . .’
Clearly the subrule makes
provision for the type of form to be used where goods are intended
for direct removal in bond as opposed
to goods which are intended for
storage in a customs and excise warehouse prior to being exported.
The word ‘direct’ does not
mean that the goods have to be moved
‘directly’ and counsel’s construction of the subrule is
patently wrong. Moreover, the
appellant did not prescribe a route
along which the imported goods were to be transported from the point
of commencement of the journey
to the customs and excise border post
where they were to exit the Republic. The Controller had the
authority to prescribe such route
(s 18(12)), but did not do so. It
follows that the further detention of the trailers was unlawful.
[18] The appeal is
dismissed with costs, such costs to include those consequent upon the
employment of two counsel.
L MPATI DP
CONCUR:
STREICHER
JA
NUGENT
JA
CLOETE
JA
CACHALIA
AJA
1
An
officer designated by the Commissioner for the South African Revenue
Service to be the controller of customs and excise in respect
of a
particular area.
2
Common
customs area is defined as the combined area of the Republic and
territories with governments of which customs union agreements
have
been concluded under s 51, ie member States of the South African
Customs Union, viz the Republic of Botswana, Kingdom of Lesotho,
Republic of Namibia, Republic of South Africa and the Kingdom of
Swaziland.
3
Defined
as a person employed on any duty relating to customs and excise by
order or with concurrence of the Commissioner.
4
See
footnote 2.