REPUBLIC OF SOUTH AFRICA
IN THE TAX COURT OF SOUTH AFRICA
(HELD IN JOHANNESBURG )
Case No.: VAT 22504
In the matter between:
THE COMMISSIONER FOR THE SOUTH APPLICANT
REVENUE SERVICE
and
TAXPAYER BLW RESPONDENT
J U D G M E N T
(1) REPORTABLE: YES / NO
(2) OF INTEREST TO OTHER JUDGES: YES/NO
(3) REVISED.
07/03/2025 ……………………
DATE SIGNATURE
2
MALI J
[1] This matter involves two applications pertaining to the discovery of documents ; and
better and fu rther discovery of documents. Both applications are opposed.
[2] The applicant is the Commissioner for the South African Revenue Service (SARS),
a government agent responsible for the collection and enforcement of tax laws within the
Republic of South Africa. The respondent, Taxpayer BLW CC (BLW) is the bonded
warehouse exporting liquor products and registered as such in terms of the Customs and
Excise Act 91 of 1964 (Customs Act) and is also registered as vendor in terms of the Value
Added Tax 89, of 1991 ( VAT) with SARS.
[3] The parties are embroiled in litigation in this court. In the main tax appeal, the
respondent ( BLW ) is the appellant, and the applicant (SARS) is the respondent. They will be
referred to as SARS and BLW respectively. The issue in the main appeal is whether BLW ’s
foreign customers during the relevant tax periods qualify for VAT at the rate of zero per cent .
[4] SARS’ s contention is that BLW does not comply with the prescribed requirement
applicable to zero rated supplies. BLW ’s contention is that it is compliant as it conducts direct
exports. Nevertheless, the crux of this application is that BLW on its own version states that
it engages transport agents to export goods.
[5] The key question in the main appeal lies in the word “exported ”. “Exported” is defined
in section 1(1) of the VAT Act –
“in relation to any movable goods supplied by any vendor under a sale or instalment
credit agreement means —
(a) consigned or delivered by the vendor to the recipient at an address in an
export country as evidenced by documentary proof acceptable to the
Commissioner.”
[6] After the exchange of pleadings in terms of the Tax Court Rules, in particular rule 31
statement, grounds of assessment by SARS; rule 32 statement, grounds of appeal by BLW
and finally rule 33 in reply to rule 32 by SARS, the discovery process commenced. SARS
issued notice in terms of rule 35(12 ) of the Uniform Rule of Court (Uniform Rules) calling
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upon BLW to produce copies for inspection and to permit copies to be made for the following,
as inferred and referred to in BLW ’s rule 32 statement:
“1. AD PARAGRAPH 15
1.1. Sale Agreements in terms of which the appellant supplied and exported goods to
its foreign customers at the VAT rate of zero percent during the relevant tax
periods.
1.2. Credit agreements in terms of which the appellant supplied and exported goods
to its foreign customers at the VAT rate of zero percent during the relevant tax
periods.
1.3. Delivery notes and/or documents confirming delivery and receipt of goods by
foreign customers at foreign addresses.
2. AD PARAGRAPH 23.2
2.1. Orders, including purchase orders, that were placed by the appellant’s customers
during the relevant tax periods.
2.2. Orders, including purchase orders, that were approved by the appellant during
the relevant tax periods.
2.3. Tax invoices that were issued by the appellant to its customers during the relevant
tax periods.
3. AD PARAGRAPH 23.3
3.1. Bank Statements reflecting payments that were received by the appellant through
electronic payments from its customers.
3.2. Tax invoices and receipts that were issued by the appellant to its customers
recording cash payments received.
3.3. Credit agreements in terms of which the appellant supplied goods to its customers
on 31-day notice.
4. AD PARAGRAPH 23.5
The Customs and export documentation that were prepared by the appellant and
relating to the sales that form the subject of this appeal.
5. AD PARAGRAPH 23.6
5.1. Agreements and/ or contracts between the appellant’s customers and their
transport contractors for collection of goods from the appellant’s SOS to the
border.
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5.2. Contracts and/ or agreements of agency between the appellant and the transport
contractors for removal of goods from the SOS.
5.3. Contracts, agreements and/ or documents appointing the transport contractors of
appellant’s customers as licensed removers under the agency of the appellant.
5.4. The contractor’s licenses authorising them to act as licensed removers in bond
(under the agency of the appellant).
6. AD PARAGRAPH 23.7
6.1. Agreements and/ contracts appointing and / or hiring representatives to
accompany and supervise the transport vehicles to the border on the appellant’s
behalf.
6.2. Applications that were made by the appellant for export under Customs
supervision.
7. AD PARAGRAPH 23.8
7.1 Applications that were made by the appellant at border posts for export under
Customs supervision.
7.2. Export documents that were issued pursuant to applications that were made by
the appellant.
7.3. Export documents recording customs seal and number after the resealing of
goods.
8. AD PARAGRAPH 24
Delivery notes and/ or documents confirming delivery and receipt of goods by
foreign customers at foreign addresses.
9. AD PARAGRAPH 25
9.1. Contracts and / agreements of agency between the appellant and the transport
contractors for removal of goods from the SOS.
9.2. Contracts, agreements and/ or documents appointing the transport contractors of
appellant’s customers as licensed removers under agency of the appellant.
9.3. The contractor’s licences authorising them to act as licensed removers in bond
(under the agency of the appellant).
9.4. Agreement between SARS and the appellant to suspend the requirement for
transporters to be licensed as ROG’s.
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10. AD PARAGRAPH 37
Custom Export documentation in terms of which the appellant exported goods
from the Republic and recording the appellant as the exporter.
11. AD PARAGRAPH 74.3.3
11.1. Contracts and/ or agreements of agency between the appellant and the transport
contractors for removal of goods from the SOS.
11.2. Contracts, agreements and/ or documents appointing the transport contractors of
appellant’s customers as licensed removers under the agency of the appellant.
11.3. The contractor’s licenses authorising them to act as licensed removers in bond
(under the agency of the appellant).
12. AD PARAGRAPHS 77.2 AND 87
12.1. Applications that were made by the appellant at border posts for export under
Customs supervision.
12.2. Export documents that were issued pursuant to applications that were made by
the appellant.
12.3. Customs Export documentation in terms of which the appellant exported goods
from the Republic and under Customs supervision.
12.4. Delivery notes and / or documents confirming delivery and receipt of goods by
foreign customers at foreign addresses.
TAKE FURTHER NOTICE THAT the documents and records referred to above relate to all
the documents and records in respect of all the sales and supplies that were zero rated by
the appellant in the relevant years of assessment and which form the subject of th is appeal.”
[7] In the aforesaid notice BLW was afforded a period of 10 days in terms of the notice
to comply. On 11 January 2024 SARS sent an email to BLW requesting a response to the
notice. On 13 January 2024 BLW without complaining and without strictly waiting for 29
January 2024, it alleges to be the due date sent an email to the respondent . In the email it is
stated, “I noted that the discovered documents which I submitted to you contains a set of
export documents for only one export transaction.” BLW then provided additional export
documents for all the export transactions during August 2019 and invited SARS to indicate
if it requires all the export documents for each tax periods in dispute.
[8] On 22 January 2023 SARS issued t hese applications , viz application in terms of
Rule 30A(2) of the Uniform Rules read with Rule 42(1) of the Tax Court Rules and
application in terms of Rule 35(7) Read with Rule42 (1) of the Tax Court Rules (Better
Discovery).
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[9] BLW deals with both applications in the same answering affidavit. I first deal with the
application in terms of rule 30A(2) read with rule 42(1) of the Tax Court Rules . The relevant
parts of the notice of motion read :
“1 Ordering the appellant to comply with the respondent ‘s notice in terms of Rule 35(12)
of the Uniform Rules, by not later than 23 January 2024 at 10.00 or such time as the
court may deem fit.
2 Ordering the appellant to pay the costs of this application, in the event that it opposes
this application. ”
[10] Rule 42(1) of the Tax Court Rules provides as follows :
“Procedures not covered by the Tax Administration Act 28 of 2011 (TAA) and Tax Court
rules that, the most appropriate rule under the Rules for the High Court made in accordance
with the Rules Board for Courts of Law Act and to the extent consistent with the Act and these
rules, may be utilised by a party or the tax court. ”
Rule 30A(2) provides as follows :
“(1) Where a party fails to comply with these rules or with a request made or notice
given pursuant thereto, or with an order or direction made in a judicial case management
process referred to in rule 37A, any other party may notify the defaulting party that h e or she
intends, after the lapse of 10 days from the date of delivery of such notification, to apply for
an order —
(a) that such rule, notice, request, order or direction be complied with; or
(b) that the claim or defence be struck out.
(2) Where a party fails to comply within the period of 10 days contemplated in
subrule (1), application may on notice be made to the court and the court may make such
order thereon as it deems fit. ”
[11] BLW submits, that the rule 30A(2 ) application is flawed and premature ; because the
Uniform Rules of Court may only be utilised where the Tax Court Rules does not provide a
remedy in the event of default. BLW further submits it had already responded to SARS ’s
notices. SARS’s contention is that the complaint about the application being premature is an
afterthought. This is because BLW has already responded to SARS notices, although
according to BLW it was supposed to act after 29 January 2024.
[12] I fully agree with SARS, whatever was supposed to be premature was interrupted by
BLW ’s own actions and response on 13 January 2024. To reiterate, BLW had discovered
some of the documents without complaining about inspection . BLW even alerted SARS that
it did not discover document pertaining to other export transactions. BLW has timeously and
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fully complied with the SARS ’ notices, notwithstanding the allegation that the procedure
adopted by the applicant was irregular and non -compliant with Tax Cour t Rules.
[13] On the merits, the submission made on behalf of BLW is that SARS cannot apply
Uniform Rule 30 A as rule 56(1) of the Tax Court Rules provides for procedure in the event
of non -compliance. Rule 56(1) of the Tax Court Rules pertains to the application for default
judgment in the event of non - compliance with the rules. Rule 56(1) provides as follows:
“Application for default judgment in the event of non -compliance with rules —(1) If
a party has failed to comply with a period or obligation prescribed under these rules or an
order by the tax court under this Part, the other party may—
(a) deliver a notice to the defaulting party informing the party of the intention to
apply to the tax court for a final order under section 129(2) of the Act in the
event that the defaulting party fails to remedy the default within 15 days of
delivery of the notice; and
(b) if the defaulting party fails to remedy the default within the prescribed period,
apply, on notice to the defaulting party, to the tax court for a final order under
section 129(2).”
[14] It is not in dispute that BLW was active, it partly complied with rule 35 notice, without
raising the issue of a 10 -day notice or 15 -day notice in terms of rule 56 of the Tax Court
Rules. It is also not in dispute that on 15 January 2024 BLW filed a supplementary affidavit.
SARS was at all material times made to believe that the parties were on the same page.
[15] BLW ’s further argument is that even if the court is satisfied that rule 30A(2) is
applicable, SARS failed to comply with the notice thereto, also that rule 56 of the Tax Court
Rules provides for a prior notice. It is trite that rule 30A provides a mechanism for addressing
non-compliance with procedural requirements in legal proceedings, offering a structured
approach for seeking court intervention to enforce compliance or penalize non -compliance.
[16] BLW further referred the court to CSARS v Virgin Mobile South Africa (Pty) Limited1.
The reference is misplaced, Virgin Mobile dealt with default judgment which arose from
SARS’s failure to act, akin to not filing a defence at all. To be specific SARS omitted to file
rule 31 statement despite numerous interventions by the taxpayer and when it decided to do
so failed to apply rule 4(2) of the Tax Court Rules.
[17] BLW also submits that one of the flaws of this application is that rule 35(12) is
purposed to produce certain documents for inspection. Again, BLW did not complain about
1 (A82/ 22; IT25117) [2023] ZAGPPHC 685 .
8
inspection and neither invited SARS to its warehouse to inspect documents its disclosed on
13 January 2024. It is further submitted that the application envisaged by SARS is not
provided for in the Tax Court Rules, because the parties are not in the same position as
“normal litigants” in terms of the Uniform Rules of Court in the High Court proceedings.
[18] In advancing the above argument BLW submits that SARS should have requested
further documents in terms of Tax Court rule 10(4) pursuant to the notice of appeal.
Rule 10(4) provides that :
“If the taxpayer in the notice of appeal relies on a ground not raised in the objection
under rule 7, SARS may require a taxpayer within 15 days after delivery of the notice of appeal
to produce the substantiating documents necessary to decide on the further progress of the
appeal.”
[19] The above submission by BLW misses the point, SARS’s case is not about BLW
having raised the grounds which it did not raise in the objection. SARS’s case is crisp, it
seeks documents referred to in BLW ’s rule 32 statement as supposed from BLW ’s
explanation.
[20] BLW further submits that failure by SARS to require BLW to deliver the necessary
substantiating documents should be evidence that SARS is already in possession of all
documents relevant to its decision to adversely assess the taxpayer. It is further submitted
that SARS is in a fishing expedition and wants to create a new dispute.
[21] Judging from the clear basis for requesting the documents SARS does not seem to
desire to create a new dispute and or re -audit. SARS would not have known about the
documents inferred to in the rule 32 statement at the assessment stage. It is common cause
that the matter is in the litigation stage. BLW ’s version as to how it conducts exports as
explained at rule 32 stage triggered this application. BLW submits that it conducts export by
having the foreign –
“customers to engage and pay for transport contractor to physically collect the goods from
Limpopo Duty Free’ Storage (SOS) and transport same to the border…The removal from the
SOS and the transportation occurred under the agency of the appellant as Removal of Goods
(ROG) were also licensed remove rs in bond and under the direct supervision of the appellant
until such time as the goods would be exported under Customs supervision ”.2
2 Para 11,5 Founding affidavit .
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[22] In addition, for example, BLW refers to transport contractors, but it does not want to
disclose documents appointing those transport contractors. BLW further refers to cash
payments, but it does not want to be asked about receipts for same. The list is endless.
[23] “Further… no party who had taken any further steps in the cause with knowledge of
the irregularit y or impropriety relied on should be allowed to make an application in terms of
the Rule.. .”3 It is evident that in the correspondence of 13 January 2024, BLW stated on their
own that there were outstanding documents . BLW knew the stage of process, that it was
after the delivery of the notice of appeal. It did not complain, the change of heart is a clear
abuse of process.
[24] The complaints by BLW are defeated by its actions, when it discovered the
documents without any qualms and without calling for the issuance of notice. In the present
application the dictum that “the Rules are made for the Court, the Court is not made for the
Rules” finds resonance.
[25] Taking into totality the arguments and the reference to “normal litigants”, whilst one
understands that the Tax Court does not operate as the High Court, but for few exceptions.
Some being that the judgments are binding between the litigants and that the Tax Court acts
as a court of revision by hearing the evidence, thus getting into SARS’s shoes. Rules of
evidence apply the same with those of the High Court. Furthermore, there is no legal basis
to refer to the litigants in the Tax Court as abnormal. Rule 42(1) of the Tax Court should be
seen as an equaliser, in the absence of adequate provisions. The scheme of the rules
correctly envisaged the gaps in the rules.
[26] The second application is in terms of rule 35(7) read with rule 42(1) of the Tax Court
Rules . The notice of motion partly reads :
“1. Ordering the appellant to comply with the respondent’s notice in terms of Rule 36(6)
of the Tax Court Rules, read with Rule 35(3) of the Uniform Rules, by not later than
23 January 2023 at 10:00
2. Ordering the appellant to make the documents listed under Rule 35(3) notice
available for inspection by not later than 23 January 2023 at 10:00 or such time as
the court may deem fit.”
[27] Rule 35(7) of the Uniform Rules reads :
“If any party fails to give discovery as aforesaid or, having been served with a notice under
subrule (6), omits to give notice of a time for inspection as aforesaid or fails to give inspection
3 Boland Construction Co (Pty) Ltd Lewin 1977 (2) SA 506 (C).
10
as required by that subrule, the party desiring discovery or inspection may apply to a court,
which may order compliance with this rule and, failing such compliance, may dismiss the
claim or strike out the defence.”
[28] Rule 35(3) of the Uniform Rules reads :
“If any party believes that there are, in addition to documents or tape recordings disclosed as
aforesaid, other documents (including copies thereof) or tape recordings which may be
relevant to any matter in question in the possession of any party thereto, the former may give
notice to the latter requiring hi m to make the same available for inspection in accordance with
subrule (6), or to state an oath within ten days that such documents are not in his possession,
in which event he shall state their whereabouts, if known to him.”
[29] Rule 36(6) of the Tax Court Rules reads:
“(2) SARS may, within 10 days after delivery of the statement under rule 32 deliver a
notice of discovery requesting the appellant to make discovery on oath of any document
material to a ground of appeal in the statement under rule 32 and not set out in the
grounds of assessment, to the extent such document is required by SARS to formulate
its grounds of reply under rule 33.”
[30] SARS’s case is that it is apparent from BLW ’s admissions and its rule 32 statement
that it has not discovered certain documents. The inference is drawn from BLW ’s mode of
doing business as submitted in the rule 32 statement.
[31] In essence SARS seeks discovery or further and better discovery, which is not
provided for in the Tax Court Rules. Rule 36 of the Tax Court Rules specifically caters for
discovery of documents in the Tax Court. Rule 36(7) reads:
“A document not disclosed pursuant to a notice of discovery may not, unless the tax
court in the interest of justice otherwise directs, be used for any purpose at the appeal by the
party who failed to make disclosure, but the other party may use such documen t.”
[32] Section 36(7) carries a limitation to the extent that the documents not so disclosed
cannot be utilised in the hearing by the other party without the tax court directing otherwise.
SARS could not have used documents it did not have or know n about in the grounds of
assessment. But now that they are referred to by BLW during the process of appeal, SARS
cannot be prohibited to call upon those documents.
[33] It is prudent for any party to be proactive once it foresees the problems beset by the
application of section 36(7) . Waiting to launch the application during the trial stage would be
unbecoming of a fair trial. SARS opted to fashion th is application in terms of rule 36 read
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with rule 37 of the Uniform Rules of Court to ameliorate the problems brought about by
rule 36. This is exactly the purpose of rule 42(1) of the Tax Court Rules.
[34] BLW also criticizes SARS for instituting two almost identical interlocutory applications
for similar relief in respect of the same documents . BLW submit s that it is an abuse of
process. I do not agree with this contention. Both applications are self -explanatory , they
serve different purposes. Rule 30A as anchored by rule 35(12) and rule 42 of Tax Court
Rules deals with discovery and inspection whereas rule 35(7) anchored by rule 36, deals
with further and better discovery. Rule 36(7) of the Tax Court Rules is inadequate, hence
deferral to rule 42(1) of the Tax Court Rules for the smooth preparation of the trial.
[35] In conclusion, SARS is successful in making the case for discovery and for further
and better discovery. In the result the following order is granted:
ORDER
1. The respondent is ordered to discover the documents in the lists of outstanding
documents attached to the respective applications as annexure A.
2. The respondent is further ordered to pay the costs of this application, including
the costs of two counsel.
________________________________
N.P. MA LI
JUDGE OF THE HIGH COURT
Date of hearing: 17 and 18 October 2024
Date of judgment: 25 February 2025
Final heads filed on 25 October 2024