SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document
in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
Case Number: 49048/2021
(1) REPORTABLE: YES
(2) OF INTEREST TO OTHER JUDGES: YES
(3) REVISED: NO
DATE: 15 APRIL 2025
SIGNATURE: JANSE VAN NIEUWENHUIZEN J
In the matter between:
VISHEN AQEEL SOOKOO First
Applicant
SPIRIT OF AFRICAN MARKET (PTY) LTD Second
Applicant
and
THE COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE SERVICE First Respondent
JACQUES VAN WYK N.O. Second Respondent
JUDGMENT
___________________________________________________________________
JANSE VAN NIEUWENHUIZEN J:
Preservation order granted under section 1 63 of the Tax Administration Act 28 of
2011 (“the Act”) – whether scope of the preservation order can extend beyond the
original purpose for which it was granted . Held that the preservation order is only in
respect of the tax liabilities identified in the application in terms of section 163(1) and
not in respect of other unrelated tax liabilities.
Introduction
[1] On 25 October 2021, Mabuse J issued a provisional preservation order in
accordance with the provisions of section 163 of the Tax Administration Act,
28 of 2011 (“ the Act”) in respect of the assets of the applicants. The
provisional order was confirmed on 16 January 2023.
[2] The applicants contend that there is no longer a basis for the preservation
order to remain in force and prays for a declaratory order to this effect.
[3] The second respondent , cited in his official capacity as the court appointed
curator to preserve the assets of the applicants, does not oppose the relief
claimed herein.
Background
[4] Pieter Willem Posthumus (“Posthumus”) , employed by the first respondent,
the Commissioner for the South African Revenue Service , as an Executive
responsible for Tactical Analysis and Investigations: Criminal and Illicit
Economic Activities deposed to the affidavit in support of the preservation
application. For ease of reference the first respondent will be referred to as
SARS.
[5] The basis for obtaining the preservation order was explained in the affidavit as
follows:
“7. The preservation order is sought based on the on -going investigations
by the CIEA Division, which focus on identifying and addressing non -
compliance with the tax Acts administered by the Commissioner. The
focus of the aforementioned includes, inter alia, the tax compliance of
companies and persons who were contracted by the South African
Government departments to supply Personal Protective Equipment
(“PPE”) in the fight against the Covid -19 pandemic.
45. The Commissioner seeks to preserve the respondent’s assets in order
to secure collection of any Value -Added Tax (‘VAT” or “output tax”),
Income Tax and/or any other taxes that may be payable by the
respondents from the amounts, inter alia, rec eived by Khagiso Afrika in
its First National bank account number 6[...] which was paid by the
South African Police Service (“SAPS”) for the procurement of PPE
through tender. Such amounts were immediately transferred by
Khagiso Afrika to the respondents as it will be detailed further below.
49. The current investigations into the tax affairs of the respondents are
premised on the funds received by Khagiso Afrika through a tender for
the procurement of PPEs which was awarded by the SAPS, ….
51. As a result of the aforementioned tender, Khagiso Afrika received
payment from SAPS totalling an amount of R 134 410 900, 00 but
failed to charge and declare VAT and the gross income to SARS.
Instead , on receipt of these amounts, Khagiso Afrika immediately
transferred sizeable amounts successively to other respondents who in
turn, failed to declare and pay any attendant taxes from such amounts.
52. I am satisfied on reasonable grounds that there is a substantial amount
of tax that may be due and payable by the respondents, in excess of
R 85 989 667, 12 (“the probable tax liability ”). Further that a
preservation order is required in order to prevent the realisable assets
of the respondents or any other person against whom the probable
tax liability may be collected, from being disposed or removed,
thereby frustrating the collection of such tax. ” (own emphasis”)
[6] An amount o f R 11 130 000, 00 was paid by Khagiso into the bank account of
the second applicant on 15 and 16 April 2020 and SARS calculated the
second applicant’s probable tax liability as follows:
Gross income received (VAT inclusive) R 11 130 000,
00 Gross Amount (Less VAT) R 9 678 260, 87
Estimated VAT prejudice R 1 403 778, 13
Estimated Income Tax prejudice R 2 709 913, 04
Total prejudice R 4 113 691, 17
[7] The citation of the first applicant as a respondent in the application, is
explained as follows:
”XIII. SPIRIT OF AFRICA
168. Spirit of Africa’s sole director is Mr Sookoo and he was appointed on
24 June 2020, the same day the erstwhile director, Mr Thabasum
Moha mmed (“Mr Moh ammed”) resigned.
169. As directors, both Mr Sookoo and Mr Mohammed had full access and
direct control of the Sprit of Africa’s FNB account number 6[...].”
[8] In conclusion, SARS summarised the basis for the application as follows:
“183. Therefore, I submit that after Khagiso Afrika had transferred the funds
to other respondents the remaining balances in its FNB account are
insufficient to meet its probable tax liability. Consequently, a
preservation order is required to prevent any further dissipation of
funds by following up and preserving funds received from Khagiso
Afrika by other respondents.
184. I am advised that the preservation of the funds paid out by Khagiso
Afrika, which are now in the possession of other respondents,
constitute a ground for granting a preservation order.
185. Furthermore, the respondents who received funds from Khagiso are
liable to be assessed for the non -declaration of income and other tax
payable therefrom. ….
187. It is not entirely known at this stage what the other respondents did
with the money received from Khagiso Afrika and what further assets
they own. Therefore, upon granting of the preservation order and the
appointment of a curator bonis, the curator bonis will be able to
investigate each respondent with a view of determining what further
assets the respondents own and trace any funds that may have been
dissipated.” (own emphasis)
Declaratory relief
Applicants’ case
[9] The declaratory relief is based on two assessments performed by SARS . The
first assessment dated 30 June 2023, pertains to the income tax liability of the
second applicant for the period 2019 – 2021.The assessment determined that
the income tax payable for the 2020 tax period is R 2 605 226, 00 and for the
2021 tax period R 3 635 717, 00. Penalties and interest were added resulting
in a total liability of R 6 282 438, 58.
[10] The second assessment dated 18 July 2023, pertains to a VAT audit
performed on the second applicant’s VAT submissions for the period 04/2020
to 10/2021. In terms of the assessment, the VAT payable for the period is R
624 957, 29 . Once penalties and interest were added, the total VAT liability
amounts to R 1 539 906, 18.
[11] The applicants contend that the assessment went beyond the scope for which
the preservation order was obtained. According to the applicants, the audit
established that the second applicant did not owe SARS any debt resulting
from the April 2020 PPE transaction with K hagiso. In the result, the basis on
which the preservation order was obtained has fallen away and the applicants
are entitled to the declaratory relief.
[12] Insofar as the indebtedness for the remaining period is concerned, the second
applicant disputes the totality of the assessments made and a dispute
resolution process is underway.
Opposition by SARS
[13] SARS d oes not deny that the second applicant does not owe any taxes in
respect of the Khagiso PPE transaction but submitted that the preservation
order is still required to collect the substantial amount of tax liability owed by
the second applicant based on the assessments made by it. SARS,
furthermore, stated that it has commenced with audit investigations into the
tax affairs of the first applicant, and that there are reasonable grounds to
believe that he too will owe income tax when SARS’s audit has been
completed.
Legal framework and discussion
[14] The question whether the scope of a preservation order is confined to the
purpose for which it was sought forms the crux of the dispute between the
parties .
[15] The parties agreed that the question could only be answered by interpreting
section 163 of the Act that provides for a preservation of assets order.
[16] Prior to considering the section, it is apposite to have regard to the principles
applicable to the interpretation of statutes as outlined in Natal Joint Municipal
Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) at par [18]:
“Interpretation is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument, or contract,
having regard to the context provided by reading the particular provision or
provisions in the light of the document as a whole and the circumstances
attendant upon its coming into existence. Whatever the nature of the
document, consideration must be given to the language used in the light of
the ordinary rules of grammar and syntax; the context in which the provision
appears; the apparent purpose to which it is directed and the material known
to those responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the light of all these factors.15
The process is objective not subjective. A sensible meaning is to be preferred
to one that leads to insensible or unbusinesslike results or undermines the
apparent purpose of the document. ”
[17] Section 163(1) of the Act reads as follows:
“(1) A senior SARS official may, in order to prevent any realisable assets
from being disposed of or removed which may frustrate the collection
of the full amount of tax that is due or payable or the official on
reasonable grounds is satisfied may be due or payable, authorise an
ex parte application to the High Court for an order for the preservation
of any assets of a taxpayer or other person prohibiting any person,
subject to the conditions and exceptions as may be specified in the
preservation order, from dealing in any manner with the assets to
which the order relates. ”
[18] The section envisages two grounds on which an application for a preservation
order may be sought :
18.1 firstly, when the full amount of tax is due and payable, which entails
that the amount is known when the application is brought; and
18.2 secondly, when an official on reasonable grounds is satisfied that the
full amount of a tax liability may become due and payable.
[19] From the facts it is clear that SARS relied on the second ground when it
applied for the preservation order. The PPE award made by SAPS to Khagiso
constituted the reasonable ground on which the application was launched.
This much was confirmed by Posth umus in the answering affidavit filed on
behalf of SARS, to wit:
“7. The preservation application was made pursuant to preliminary
investigations conducted by the Commissioner into the tax compliance
of the respondents in the preservation order. These respondents were
involved in questionable awards made by the South African Police
Service (“SAPS”) to Khagiso as a part of the procurement of Personal
Protective Clothing (‘PPE’s”), during the National Disaster caused by
the Covid -19 pandemic. ”
[20] Subsequent to the investigation by SARS , it became clear that t he second
applicant d id not have a tax liability in respect of the Khagiso transaction. The
ground for obtaining the preservation order, therefore, seized to exist.
[21] In the aforesaid circumstances, section 163( 10)(b) provides that a
preservation order will no longer be in force and effect if the assets subject to
the preservation order are no longer required for the purpose of the
satisfaction of “the tax debt ”.
[22] Having regard to the section as a whole, it appears that “the tax debt” referred
to in section 163(10) (b) is the tax amount that was due and payable or on
reasonable grounds may become due and payable as envisaged in
subsection (1). Subsection (3) lends support to the aforesaid interpretation; in
that it states that “a preservation order may be made if required to secure the
collection of the tax referred to in subsection (1). ” (own emphasis”) .
[23] Mr S igogo SC, counsel for SARS, did not agree. Mr Sigogo relied on the
definition of a “tax debt ” in the Act, to wit “an amount referred to in section
169(1).” Section 169(1) in turn provides that “an amount of tax due and
payable in terms of a tax Act is a tax debt due to SARS for the benefit of the
National Revenue Fund.”
[24] Mr Sigogo submitted that the tax due and payable by the second applicant is
a “tax debt” that falls within the ambit of section 163(10)(b). According to Mr
Sigogo, the fact that the tax debt was not the subject matter of the
preservation order is of no consequence. As long as a taxpayer is indebted to
SARS, a “tax debt” exists and the preservation order remains intact.
[25] In order to determine the context in which a “tax debt” is defined in the Act, it
is apposite to have regard to the structure of the act. Section 169 that defines
a “tax debt” is contained in Chapter 11 which regulates the recovery of tax in
general.
[26] Section 163 is contained in Chapter 10 which regulates the payment of tax
and only applies in defined circumstances. In order to invoke the provisions of
the section, SARS needs to meet the requirements contained in section 163.
The purpose of section 163 is manifestly confined to these requirements.
[27] In the aforesaid context, a “tax debt” for purposes of section 163, must be
interpreted within the confines of the section.
[28] In casu the preservation order was obtained at the behest of the Tactical
Analysis and Investigations: Criminal and Illicit Economic Activities section of
SARS. The “criminal and illicit economic activity” that formed the subject
matter of the investigation was, on the version of Posthumus: “the
questionable awards made by the South African Police Service (“SAPS”) to
Khagiso as a part of the procurement of Personal Protective Clothing
(‘PPE’s”), during the National Disaster caused by the Covid -19 pandemic.”
[29] The application was not based on the payment of tax liabilities that falls
outside the scope for which the preservation order was obtained. Chapter 11
is appliable to the recovery of tax and should be utilised to recover any tax
liability that does not fall within the scope of the investigation for which the
preservation order was obtained.
[30] Should SARS be of the view that the present tax debt of the second applicant
or the probable tax debt of the first respondent meets the requirements of a
preservation order, SARS is at liberty to apply for such an order. It is,
however, inconceivable that a preservation order that was obtained for a
specific purpose will be in force ad infinitum and may be utilised by SARS for
any future tax debt that may become due and payable.
[31] In the result, I am satisfied that the applicants are entitled to a declarator on
terms prayed for in the notice of motion and to a cost order as prayed for.
ORDER
The following order is granted:
1. It is declared that the preservation order issued on 16 January 2023 is no
longer in force in relation to the assets of the applicants.
2. The first respondent is ordered to pay the costs of the application incl uding
the costs of counsel on scale C.
N. JANSE VAN NIEUWENHUIZEN
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
DATE HEARD :
25 February 2025
DATE DE LIVERED:
15 April 2025
APPEARANCES
Counsel for the Applicant s: Mastenbroek
Instructed by: Ulrich Roux Attorneys
For the First Respondent : Sigogo SC (with him Kapila)
Instructed by: Majang Inc