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[2009] ZAGPPHC 290
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Saira Essa Productions CC and Others v South Africa Revenue Service (9849/2008) [2009] ZAGPPHC 290 (21 September 2009)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT)
Case
Number: 9849/2008
In
the matter between:
SAIRA
ESSA PRODUCTIONS CC
1st APPLICANT
SAIRA
ESSA
2nd APPLICANT
MARK
CORLETT 3rd APPLICANT
vs
THE
SOUTH AFRICA REVENUE
SERVICE 1st
RESPONDENT
JUDGMENT
Delivered
on: 21 September 2009
POTTERILL
AJ,
1.
The applicants, after oral argument, are seeking only the following
relief:
1.1.
“Declaring that the
Applicants have duly and properly complied with their obligations
under the Small Business Tax Amnesty
and Amendment of Taxation Laws,
Act, 2006 (‘‘the Act”) in respect of the charges
levied against them and detailed
in the summonses served upon them
and attacked hereto marked “SE!” “SET SE3;
1.2.
Declaring that the Applicants are
accordingly entitled to rely upon the protection afforded by Section
8(c) of the Act read with
Section 5
of the
Second Small Business Tax
Amnesty and Amendment of Taxation Laws, Act, 2006
and are thus
protected and/or relieved from prosecution in respect of the charges.
1.3.
Ordering only those Respondents
(or other persons) that oppose this application to pay the costs
hereof jointly and severally the
one paying the other to be absolved
such costs to include the costs of two Counsel, where two Counsel are
employed. ”
2.
The following facts are common cause:
2.1.
A criminal investigation was instituted against the applicants during
July 2003. According to a letter dated 11 August 2004
the
investigation pertained to the non-filing and under declaration of
VAT, PAYE and Income Tax. The first Applicant was notified
about the
investigation in said letter.
2.2.
The First applicant represented by the second and third applicants
was then charged with non-payment of the VAT to SARS for
the period
10/2002-02/2004 (Schedule A to the charge sheet) and PAYE not paid
over to SARS for the period 06/2003-9/2004 Schedule
B to the charge-
sheet. They made their first court appearance on 12 August 2005.
2.3.
The applicant’s accountant compiled the financial statements
and the VAT returns for the tax periods October 2002-February
2004.
2.4.
Consequently VAT became payable by the Applicants and was in fact
paid between August 2004 and September 2005.
2.5.
The VAT was paid before the submission of the application for
amnesty. The application for amnesty was on made on 27 October
2006.
2.6.
The First, Second and Third Applications for indemnity were approved
on 11 May 2007, 26 March 2007 and 16 April 2007 respectively.
2.7.
The Commissioner did not deliver a notification as intended in
Section 5(4)
of the said Act.
3.
The Small Business Tax Amnesty and Amendment of Taxation Laws, Act No
9 of 2006 (the Amnesty Act) was assented to on 20 July
2006 and came
into operation on 25 July 2006. The purpose of the Act is to provide
tax relief to small businesses which are either
not registered for
tax, or those registered for tax but for the years preceding the 2006
year of assessment have not declared tax,
understated tax or whose
tax returns were outstanding. The qualifying periods in respect of
tax is tax years up to 28 February
2006. In terms of the Act “2006
year of assessment” means “the year of assessing ending
during the 12 month period
commencing 1 April 2005 and ending 31
March 2006.“ The total gross income of the business must not
have not exceed R10 million
to qualify.
4.
The relevant sections relied on by the parties are Sections 5(1),
5(2), 5(4), 8(c), 10(a) (b) and (c) of Act 9 of 2006.
5.
The applicant contends the crisp question for determination is
whether someone who has applied for amnesty and was granted amnesty
can still be prosecuted for the non-payment of VAT to which the
amnesty pertains. It was further argued that it could never be
the
intention of the Act to benefit businesses that paid nothing versus
businesses that paid.
6.
The respondent categorically denies that the applicants were granted
amnesty in respect of the VAT forming the subject matter
of the
criminal prosecution. They contend that the applicants were granted
amnesty in respect of other periods not covered by the
previous
assessments [paragraph 24 of the answering affidavit]. Besides this
factual dispute they also contend that it was not
legally possible to
have obtained amnesty for the periods they are prosecuted for.
7.
The applicants aver that they have been granted amnesty for the VAT
periods as charged for in schedule A of the charge sheet
and
consequently are entitled to immunity from criminal prosecution in
terms of section 5(1) of Act 10. It is in dispute whether
the
qualifying periods for which amnesty was granted is the subject
matter of the prosecution. According to the charge sheet, schedule
A
they are charged for VAT for the periods 10/2002-02/2004. The
respondent states that the Amnesty Act is to provide relief for
the
years preceding the 2006 year of assessment. In terms of the
definition of the 2006 year of assessment that is the period before
1
April 2005. In the amnesty application form attached to the documents
no provision is made for stating for
what
periods amnesty is required. Section 4 (1)of Act 9 requires the
applicant to in the application disclose taxable income in
respect of
all amounts accrued, received or deemed to have been received or
accrued "to applicant from the carrying on of
business during
the 2006 year of assessment.” The respondent does not state
that this was not done in the applicants’
application. In this
application the applicants ticked the boxes relating to inter alia
VAT and PAYE. In terms of section 4(2)
the applicant “must also
furnish an income tax return for the 2006 year of assessment and a
statement of all assets., and
liabilities as at the end of that year
together with the application for tax amnesty.” The respondent
does not aver that
this was not done. The amnesty application would
thus cover the period from start of business to 1 April 2005 and the
tax income
return the period of 1 April 2005-31 March 2006. That
would correspond with the qualifying period as defined in the Act and
specifically
(d) “any other tax, levy or contribution means any
tax period or month which ends on or before 28 February 2006. Under
these
circumstances the bold averment by the respondent that:
“However they were granted amnesty in respect of other periods
not
covered by the previous assessments” [paragraph 24 of the
answering affidavit] constitutes a bare denial. “Other periods”
is never defined and is vague and insubstantial. This does not
generate a genuine or real dispute of fact and the formulation as
set
out in Plascon Evans Paints Ltd v Van Riebeeck Paints (Pty)Ltd
1984(3) SA 623(A) is accordingly not applicable. The respondent
did
not answer or argue that the applicants’ were not granted
amnesty pertaining to the charges set out in schedule B.
8.
The respondent’s legal basis for averring that amnesty could
not have been granted is that information was furnished to
the
Commissioner, was assessed, became payable and was in fact paid. This
argument is founded on section 10 of the Act. This reads
as follows:
Section
10(a) (b) and (c):
“
The
tax amnesty relief does not apply in respect of any tax... to the
extend that it-
(a)
had
already been paid before the submission of the application;
(b)
is
payable or becomes payable by the Applicant in consequence of any
information which
was
furnished to the Commissioner by the Applicant or a representative of
the Applicant in any return or declaration or otherwise
before the
submission of the application: oris payable by the applicant in terms
of an assessment issued by the Commissioner before
the submission of
the application.. ”
From
the common cause facts supra the Applicants had furnished information
to the Commissioner, assessments were issued and assessments
paid.
Thereafter application for amnesty is made and amnesty is granted.
Prima facie it would seem that section 10 would bar amnesty
from
being granted in these circumstances. Prima facie the applicants’
could not rely on sect on 5 of Act 10 of 2006 which
reads as follows:
‘
(1)
An applicant whose application has been approved in terms of Section
5 of the Tax Amnesty Act [Act 9 of 2006] is deemed not
to have
committed any offence in terms of any Act to which Chapter 1 of the
Tax Amnesty Act relates
to the extent
that relief has been granted in terms of Section 8 of the Tax Amnesty
Act [my emphasis]
(2)
Subsection (1) also applies to a person insofar as that person acted
in a representative capacity on behalf of the applicant
during the
qualifying period. ”
Section
8 of the Act reads as follows:
Section
8(c)
“
Subject
to Section 10, an applicant whose application has been approved in
terms of Section 5 is not liable for this payment of_
(c)
any value-added tax in terms of the Value added Tax Act, in respect
of any supply or importation of goods or services, during
the
qualifying period...’’[my emphasis]
Section
10 is thus the overriding section setting out to what circumstances
tax amnesty relief does not apply. In terms thereof
the VAT forming
the subject- matter of the charge-sheet was not circumstances to
which amnesty relief applies. The reality is however
that de facto
the Commissioner did grant the applicants’ amnesty in terms of
the applicants’ application. This application
included amnesty
for VAT. The respondent’s failure to enlighten the Court”
for what periods not covered by previous
assessments” they were
granted amnesty can only lead to one inference, i.e. the VAT as set
out in the charge sheet was included
in the amnesty approval. This is
also so for the reasoning as set out in paragraph 7 supra. The
respondent’s argument that
the Commissioner did not have the
power to approve the Applicant’s application for amnesty in
respect of the VAT forming
the subject-matter of the
investigation is prima facie correct. The
Commissioner did however grant amnesty.
9.
The respondent also relied on:
Section
5(2):
“
The
Commissioner may not, subject to subsection (4), approve an
application in terms of subsection (1) if the Commissioner, at any
time before the submission of the application for tax amnesty,
delivered a notice to that applicant or that applicant’s
representative informing that applicant of any audit, investigation
or other enforcement action relating to any failure by that
applicant
to comply with any Act in respect of which application for tax
amnesty is made.”
Section
5(4):
“
Subsection
(2) does not apply if the Commissioner has, before the submission of
the application for tax amnesty, delivered a notification
that-
(a)
the notice contemplated in that subsection has been withdrawn; or
(b)
the audit or investigation contemplated in that subsection has been
concluded. ”
From
the common cause facts set out above there was a notice of
investigation delivered before the submission of the application
for
tax amnesty. This notice and the submittal of the returns by the
applicants were before the Act came into operation on 20 July
2006.
No notice in terms of 5(4) was delivered. The applicants apply for
amnesty when the Act comes into operation. If th Commissioner
had the
intention to retrospectively invoke section 5(2) of th' Act, he did
not do so. The applicants were in fact granted amnesty.
10.
The Commissioner thus when granting amnesty either failed to take
int< account material information because it was not before
him or
he failed to ac upon the information. The amnesty in fact exists and
this court can not ignore it. The respondent’s
argument that
the Commissioner had no power to do so is nothing else but an
argument that he acted ultra vires.
I
have not beer asked to declare the amnesty void or voidable and am
not going to do same As long as the amnesty exists in fact,
it
provides the foundation for reliance or section 5 of Act 10. In terms
of section 5(2) of Act 9 the Commissioner, no the applicants,
ought
to have known what applications he may approve anc what applications
he may not approve.
11.
I accordingly make the following order:
11.1.
Declaring that the Applicants have duly and properly complied with
their obligations under the Small Business Tax Amnesty
and Amendment
of Taxation Laws, Act, 2006 (“the Act”) in respect of the
charges levied against them and detailed in
the summonses served upon
them and attached hereto marked “SE1” “SE2”
SE3;
11.2.
Declaring that the Applicants are accordingly entitled to rely upon
the protection afforded by Section 8(c) of the Act read
with
Section
5
of the
Second Small Business Tax Amnesty and Amendment of Taxation
Laws, Act, 2006
and are thus protected
and/or relieved from prosecution in respect of the charges.
11.3.
Ordering the respondent to pay the costs, such costs to include the
costs of two Counsel where two counsel are employed.
S.
Potterill
Judge
of the High Court
Attorney
for the Applicants:
GARLICKE
& BOUSFIELD INCC
c/o
FRIEDLAND HART & PARTNERS.
Pretoria.
(Ref:
TRUDIE VAN STRAATEN/CB/G2062)
Tel
012 424 0200
Attorney
for the Respondent:
THE
STATE ATTORNEY
Pretoria.
(Ref:
1265/2008/Z10/mk).
Tel:
012 309 1500.