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[2013] ZAWCHC 215
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Henta's Verspreiders CC v Commissioner for the South African Revenue Service (22826/11) [2013] ZAWCHC 215 (6 March 2013)
Republic of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
Case No:
22826/11
Before:
The Hon Mr Justice Binns-Ward
In the matter
between:
HENTA’S
VERSPREIDERS
CC
Applicant
and
THE COMMISSIONER
FOR THE SOUTH AFRICAN
REVENUE
SERVICE
Respondent
JUDGMENT
DELIVERED: 6 MARCH 2013
BINNS-WARD
J:
[1] The applicant has applied for an order directing the release by
the revenue authority of 48 master cases and 47 bricks of Mega
Blue
20’s cigarettes, 97 master cases of Chicago cigarettes, 34
master cases of Kingdom cigarettes and 41 master cases of
Sevilles
cigarettes.
[1]
The goods in question are being held by the South African Revenue
Service (‘SARS’) under the provisions of the
Customs and
Excise Act 91 of 1964 (‘the Act’). SARS suspects
that the goods in question have been dealt with
irregularly in terms
of the Act. Section 87(1) of the Act, which has the subheading
‘
Goods irregularly dealt with liable to forfeiture
’,
provides, insofar as relevant, that ‘[a]
ny goods imported,
exported, manufactured, warehoused, removed or otherwise dealt with
contrary to the provisions of this Act or
in respect of which any
offence under this Act has been committed … shall be liable to
forfeiture wheresoever and in possession
of whomsoever found
’.
[2]
The applicant close corporation is a trader ‘in different wares
with various traders and entities in and around Cape Town’.
[2]
Its sole member alleges that in September 2010 he was requested by a
certain Mr Yusuf Paruk to supply cigarettes to a new
customer.
He sourced stock for this purposes from two suppliers, Delta Tobacco
Corporation (Pty) Ltd (‘Delta’)
and Caledonian
Supermarket. Caledonian Supermarket is owned by Yusuf Paruk’s
brother, Ismail. The Kingdom and
Seville cigarettes were
sourced from Delta and the Chicago and Mega cigarettes from
Caledonian Supermarket. Delta issued
the applicant with an
invoice, dated 17 September 2010, for the goods supplied by it.
The invoice was for 1850 cartons
(37 cases) of Kingdom cigarettes at
R252 062,50 and 2250 cartons (45 cases) of Seville cigarettes at
R306 562,50 (inclusive
of VAT). The applicant also
received an invoice, dated 22 September 2010, from Caledonian
Supermarket CC for 55 master
cases of Mega Blue cigarettes at
R374 000 and 100 master cases of Chicago cigarettes at R615 000
(inclusive of VAT).
[3]
According to the applicant, the cigarettes were sold on consignment
to an entity called SABCO. Shortly after the delivery
of the
cigarettes to SABCO the applicant was informed that the goods had
been detained by SARS. It was subsequently ascertained
that the
goods had been detained at premises at 70 Middel Road, Rylands
Estate, Athlone, Cape Town, after having been discovered
there by the
police in circumstances which do not appear from the papers, together
with a large number of other cigarettes that
are not subject to the
current proceedings. The cigarettes were in the physical
possession of Messrs Jappie Salie and Hassiem
Ismail at the time.
As the goods had been sold to SABCO on consignment, the latter
declined to pay for them. The applicant
in turn was unable, in
the circumstances of not having turned the stock to account, to pay
its suppliers. (The applicant,
as a seller on consignment bore
the risk of loss in respect of the goods; see
Sun Couriers (Pty)
Ltd v Kimberley Diamond Wholesalers
2001 (3) SA 110
(NC),
[2001]
2 All SA 646
, at para. 73-4.)
[4] It
appears to be common ground that the goods in question were detained
by SARS in terms of s 88(1)(a) read with s s 4(4)(a)
of the Act. An ‘officer’ (as defined in s 1 of
the Act) is empowered to detain goods under those provisions
if it is
reasonably suspected by him that they are susceptible to forfeiture.
The object of the detention is to enable it
to be established that
the goods are indeed liable to forfeiture, whereupon they may be
seized as forfeit under the Act.
SARS is afforded a reasonable
period within which to establish whether the goods are liable to
forfeiture. If the detained
goods in question are not seized
before the effluxion of such period they must be released from
detention; see
Commissioner, South African Revenue Service v Trend
Finance (Pty) Ltd and Another
2007 (6) SA 117
(SCA), at
para. 29. It has not been suggested that the respondent
had not been entitled to detain the goods in the circumstances
of the
current case. The question is whether they should be released
from detention.
[5]
After the detention of the goods the applicant embarked on a long
drawn out correspondence with SARS in an attempt to procure
the
release of the cigarettes. SARS indicated that it would be
prepared to release the cigarettes only once it had been satisfied
that the detained cigarettes had not been dealt with irregularly in
terms of the Act and that all appropriate duties and VAT had
been
paid. SARS invited the applicant to arrange with the suppliers
of the cigarettes to provide a batch number or stock
sheets listing
the batch codes of the cigarettes. An audit trail was required
to enable the detained cigarettes to be positively
matched up against
the particulars on any documentation to be supplied. The Mega
Blue, Kingdom and Seville cigarettes are
manufactured in Zimbabwe.
Customs duty would have been payable when they were imported into
this country. Chicago cigarettes
are made in South Africa and
subject to the payment of excise duty by the manufacturer.
[6]
One De Villiers, an official employed in the Enforcement
Investigations unit of SARS, inspected the goods detained on
22 September
at the state warehouse in Cape Town. He
found:
97
boxes of Chicago cigarettes, each containing 50 bricks. The
packets of cigarettes were properly packaged in accordance
with the
applicable regulations. The packets bore the prescribed SA
Diamond Stamp
[3]
and health warnings.
[4]
48
boxes of Mega Blue cigarettes each containing 50 bricks and one box
containing 47 bricks of Mega Blue cigarettes. The
packets of
cigarettes were properly packaged in accordance with the applicable
regulations. The packets bore the prescribed
SA Diamond Stamp
and health warnings.
41
boxes of Seville cigarettes each containing 50 bricks. Some of
the packets of Seville cigarettes were not properly packaged
in
accordance with the applicable regulations. They did not bear
the prescribed SA Diamond Stamp or the stamp impression
was so faint
that it could not be determined whether it was the SA Diamond
Stamp. All the packets carried the prescribed
health warnings.
34
boxes of Kingdom Blue cigarettes each containing 50 bricks.
The packets of cigarettes were properly packaged in accordance
with
the applicable regulations. The packets bore the prescribed SA
Diamond Stamp and health warnings.
A
large quantity of other brands of cigarettes which did not bear the
prescribed SA Diamond Stamp and health warnings, or which
were
marked ‘Not for sale in South Africa’
It is
notable that the goods claimed by the applicant are those that were
on their face, apart from some of the Seville cigarettes,
compliant
with South African packaging regulations. No-one has
claimed title to the other cigarettes which were non-compliant.
The applicant contends that this peculiarity should not count against
it, but rather against SABCO, which was in possession of
the goods.
There is some cogency in this contention having regard to the
subsequent behaviour of the person in control of
SABCO, who denied
the existence of the entity notwithstanding that it is clear that he
arranged the burglar alarming of the premises
on which the goods were
found for SABCO.
[7] Mr
De Villiers testified that a waybill number was found on four of the
boxes of Seville cigarettes. He was able to trace
the
references back and establish that the goods to which the waybill
pertained should have been held in the bonded warehouse of
Delta and
had not been intended for consumption on the local market. The
relevant import duties and VAT had not been paid
on the cigarettes
and they were unlawfully out of bond in South Africa. De
Villiers alleged that the aforementioned Yusuf
Paruk was in some way
connected with Delta, but he was unable to identify the precise
nature of the connection.
[8] De
Villiers also testified that the invoice from Delta annexed to the
applicant’s founding papers in respect of the transaction
in
terms of which the applicant alleges it acquired the Kingdom and
Seville cigarettes differed from the invoice submitted to him
under
an earlier affidavit by the same deponent supposedly for the same
purpose. The date and invoice numbers differ.
De Villiers
points out that both invoices cannot relate to the same goods.
The invoice(s) is/are in respect of 37 master
cases of Kingdom
cigarettes and 45 master cases of Sevilles. Mr De Villiers
highlighted the absence of any explanation in
the applicant’s
founding papers of the discrepancy between the amount of cigarettes
being sought in terms of the notice of
motion and that allegedly
obtained by the applicant in terms of the invoices from its alleged
suppliers. The applicant is
claiming the release of only 41 of
the 45 cases of Seville cigarettes that were supplied to it by
Delta. Of course, according
to the inventory only 41 cases of
Seville cigarettes were detained.
[9] De Villiers established that the manufacturer of the Chicago
brand of cigarettes is Goldleaf Tobacco Company of Gauteng.
He
submitted samples of the detained Chicago cigarettes to the
manufacturer, which confirmed that the samples conformed to all
the
characteristics of its products. Gold Leaf Tobacco Company,
through its trading arm, Gwaai Marketing (Pty) Ltd, had invoiced
Caledonian Supermarket for 160 cases of Chicago cigarettes during the
period from 8 June to 8 September 2010, and for
a further
100 cases on 23 September 2010. An affidavit by the
production manager of Gold Leaf Tobacco Company, Mr Bilal
Mohamed,
put in by the respondent indicated that the company was unable to
link the samples provided for testing by SARS with those
that were
subject of the goods subject of the invoices made out to Caledonian
Supermarket because ‘at present, GLTC does
not have a “track
and Trace” system in place nor a batch numbering system’.
(There appears to be no statutory
provision requiring a relevant
‘track and trace’ or batch numbering system.)
[10]
The applicant, having initially supplied SARS only with the invoices
it had obtained from the two suppliers of the cigarettes,
thereafter,
through its attorneys, supplied the following further documentation:
(a) A sales invoice, dated 1 April 2010, made out by Breco
International (Pvt) Ltd of Harare in respect of 70 master cases of
Mega Blues cigarettes, and 130 master cases of two other types of
cigarettes, which I am unable to identify by name because of the
poor
legibility of the copy of the invoice in the papers. The
invoice identified the consignee-delivery address as ‘International
Cigarette Manufacturers (Pvt) Ltd c/o Kingfisher Freight’,
Johannesburg, and the purchaser as ‘International Cigarette
Manufacturers (Pty) Ltd, Maude Street, Sandton, Johannesburg’.
Payment (in the amount of US$15600) was on 90 day terms
and,
according to the tenor of the invoice, had to be made by 30 June
2010.
(b) A tax invoice, dated 13 April 2010, rendered by Kingfisher
Freight Services CC to ‘International Cigarette Manf…
(Pty) Ltd’, Maude Street, Sandton, Johannesburg, in respect of
a shipment of 200 cases of cigarettes from ‘Breco Intl
–Harare’. Two of the items listed on the invoice
were Customs Duties in the amount of R894 000 and VAT on
Bill of
Entry in the amount of R142399,46. An amount of R136,80 was
also indicated on the invoice as having been charged
for ‘SARS
Release DA74’. The goods subject of the invoice are
indicated as having entered on Flight SA6743 on
‘12/04’.
No bill of entry number is reflected on the invoice.
(c) A tax invoice, dated 28 April 2010, rendered by Kingfisher
Freight Services CC to International Cigarette Manufacturers
(Pty)
Ltd, Maude Street, Sandton on respect of a shipment from ‘Breco
Intl –Harare, invoice no. 0701 attn: Dave Jackson.
Two of
the items listed on the invoice were ‘Import Duty’ in the
amount of R35522,16 and ‘VAT on Bill of entry’
in the
amount of R223500. Bill of Entry particulars were indicated on
the invoice as follows: ‘Bill of Entry No. 54653
22/04’.
(d) A copy of a sales invoice number 0701, dated 21 April 2010,
issued by Breco International (Pvt) Ltd of Harare to International
Cigarette Manufacturers (Pty) Ltd, Maude Street, Sandton,
Johannesburg in respect of 50 Master cases of Mega Blues cigarettes.
(e) A copy of a tax invoice (invoice no. HOJ004) issued by
International Cigarette Manufacturing (Pty) Ltd, Maude Street,
Sandton
to Hojas Trading of Johannesburg, dated 2 May 2010 in respect
of 50 master cases of Mega Blue at R335000.
(f) A copy of a tax invoice (invoice no. HOJ001) issued by
International Cigarette Manufacturing (Pty) Ltd, Maude Street,
Sandton
to Hojas Trading of Johannesburg, dated 4 March 2010, in
respect of 135 master cases of Mega Blue at R793420,65 (excluding
VAT).
(g) A copy of a tax invoice (invoice no. HOJ002) issued by
International Cigarette Manufacturing (Pty) Ltd, Maude Street,
Sandton
to Hojas Trading of Johannesburg, dated 2 May 2010 in respect
of 71 master cases of Mega Blue at R475700.
(h) A copy of a tax invoice (invoice no. HOJ003) issued by
International Cigarette Manufacturing (Pty) Ltd, Maude Street,
Sandton
to Hojas Trading of Johannesburg, dated 2 May 2010 in respect
of 55 master cases of Mega Blue at R368500.
(i) A tax invoice issued by Hojas Trading to Caledonian Supermarket,
Cape Town, dated 15 July 2010, in respect of ‘60
x 50 x
200’s’Mega Blue in the amount of R401986,80.
(j) A copy of a chain of email correspondence between Dave Wilson
(whose ‘@icman’.co.za’ email address suggests
that
he is attached to International Cigarette Manufacturing (Pty) Ltd and
one Graeme Fick of the CBCU
[5]
at SARS. In an email dated 30 August 2010, Fick had
requested ‘
batch numbers/codes for the Mega Blue cigarettes
listed in the attach
(sic)
spread sheet
’. The
response from Wilson, dated 31 August 2010 stated ‘
The stock
we bring in has no barcodes or batch numbers. The packaging,
externally and internally identifies the brand name
’.
The copy of the chain of email correspondence has endorsed at its
foot in handwriting: ‘
This stock was released on ±
18/9/2010. Thanks
’. (The spreadsheet referred to in
the email correspondence was not enclosed as part of the relevant
annexure in the
applicant’s founding papers.)
(k) A copy of a letter, dated 30 August 2010, from a Mr Mandel
Sarris of Hojas Trading requesting the release by SARS of certain
seized stock. It is not evident from the content of the letter
what the stock is, but it appears to be of the same character
as ‘400
master cases’ held in bond at OR Tambo Airport. The
reference to master cases suggests that the stock
in issue was
probably cigarettes. The stock that was the subject of Mr
Sarris’s letter had obviously been seized at
some time prior to
the date of the letter.
(l) A copy of a letter, dated 8 September 2010, from Dave Wilson,
Financial Manager of International Cigarette Manufacturing (Pty)
Ltd,
to the Manager, Hojas Trading CC. The body of the letter reads:
‘
SARS query
Further to your query from SARS,
the manufacturers advise that stamp has no reference regarding
manufacture
’.
[11]
It would appear that SARS undertook to investigate the position in
respect of the Mega Blue cigarettes based on the aforementioned
documentation that the applicant had supplied. Correspondence
attached to the founding affidavit also indicates that SARS
had
undertaken to investigate the position of the seized Chicago branded
cigarettes with the manufacturer, Gold Leaf Tobacco Corporation
(Pty)
Ltd. In an email to the applicant’s attorneys, dated
March 24, 2011, Mr JC De Villiers of SARS stated ‘
This
office is in constant communication with Mr Bilal Mohamed of Gold
Leaf Tobacco Company regarding the “Chicago”
brand
cigarettes. He is currently out of the country. He
assured me per e-mail on 22 March 2011 via his blackberry
that he
would afford his serious attention to finalise the matter by early
next week
’. (As appears from the affidavit of Mr
Mohamed referred to in paragraph [9], above, the information
obtained by
the respondent would suggest that the cigarettes
concerned were indeed manufactured by Gold Leaf Tobacco.)
[12]
When De Villiers was subsequently pressed for a progress report he
responded on 6 May 2011 saying that he was not attached
to
‘Customs’ and was in no position to make decisions in
their ambit. He reported that the applicant’s
attorney’s
request had been forwarded to the case officer, Inspector Olkers.
De Villiers stated that Olkers had assured
him that a response in
respect of the request would follow shortly.
[13]
Olkers wrote to the applicant’s attorneys on 30 May 2011.
The relevant part of the letter went as follows:
Unfortunately we do not agree with your contention as
per your letter dated the 05
th
May 2011 that the invoices
supplied by your client are compliant with the Act and rules.
We hold the view that no duty has
been paid on the goods under
detention for the following reason:
The invoices and bill of entry supplied cannot be
reconciled to these specific goods. As we mentioned in previous
cases in
which you [i.e. the applicant’s attorneys] were
involved in (sic) we once again reiterate that as far as we are
concerned
these invoices could be for any goods upon which duty has
legitimately been paid, hence the need for code, description,
character
or other marks as provided in section 41(2) [of the Act].
Your attention further drawn (sic) to section 87 of the
Act which empowers the Commissioner to forfeit any goods which have
been
irregularly dealt with in terms of the Act from (sic)
wheresoever and in the possession of whosoever found. We
herewith wish
to advise that this matter was presented to a
Discretion Decision Committee consisting of senior managers,
technical customs specialist
and legal advisors on the 20
th
May 2011, and a decision was taken not to release the aforementioned
cigarettes.
[14]
The relevant part of s 87 of the Act referred to in Olkers’
letter has been quoted above.
[6]
Section 41(2) of the Act reads as follows:
Every exporter or manufacturer shall allocate to any
goods of a class or kind specified in the rules for the purposes of
this subsection
and exported to or from or manufactured in the
Republic a distinctive and permanent identification number, code,
description, character
or other mark in such manner and in accordance
with such method as may be prescribed in the rules and such number,
code, description,
character or other mark shall be quoted or
reproduced in all prescribed invoices relating to such goods and in
all such other documents
relating to such goods as may be specified
in the rules.
The
definition of ‘
exporter
’ in s 1 of the Act
includes ‘
in relation to imported goods, includes the
manufacturer, supplier or shipper of such goods or any person inside
or outside the
Republic representing or acting on behalf of such
manufacturer, supplier or shipper
’. The provisions of
s 41(2) thus apply to imported goods of a kind specified in the
rules as well as to locally
manufactured goods of the same kind.
[15]
The reliance in Olkers’ letter on s 41(2) is explicable in
the relevant regulatory context. In this connection
regard
needs to be had to the statutory provisions relating particularly to
tobacco products. Thus s 35A(1) of the Act
provides:
(1) The Commissioner may prescribe by rule-
(a) the sizes and types of containers which may be used
by a manufacturer for the packing of cigarettes and cigarette
tobacco;
(b) distinguishing marks or numbers in addition to the
stamp impression referred to in subsection (2) which must or must not
appear
on containers of cigarettes and cigarette tobacco removed from
a customs and excise warehouse for home consumption or for export;
(c) any other matter which is necessary to prescribe and
useful to achieve the efficient and effective administration of this
section.
Section
35A(2) and (3) of the Act provides:
(2) No licensee may remove any cigarettes or allow any
cigarettes to be removed from a customs and excise warehouse unless-
(a) if removed for home consumption, a stamp impression
determined by the Commissioner has been made on their containers; or
(b) if removed for export, such stamp impression does
not appear on the containers; and
(c) the cigarettes otherwise comply in every respect
with the requirements prescribed by rule.
(3) No cigarettes or cigarette tobacco shall be sold or
disposed of or removed from the customs and excise manufacturing
warehouse
in question in partly or completely manufactured condition
except in accordance with the provisions of this Act.
and
s 54 provides:
Special provisions regarding the importation of
cigarettes
(1) The Commissioner may prescribe by rule-
(a) the sizes and types of containers in which
cigarettes may be imported into the Republic;
(b) distinguishing marks or numbers in addition to the
stamp impression referred to in subsection (2) which must or must not
appear
on containers of imported cigarettes;
(c) any other matter which is necessary to prescribe and
useful to achieve the efficient and effective administration of this
section.
(2) No person may import any cigarettes unless-
(a) if entered for home consumption, a stamp impression
determined by the Commissioner has been made on their containers; or
(b) if entered for storage in a customs and excise
warehouse for export such stamp impression does not appear on the
containers;
and
(c) the cigarettes otherwise comply with the
requirements prescribed by rule.
(3) No imported cigarettes shall be sold or disposed of
or removed from the customs and excise warehouse concerned except in
accordance
with the provisions of this Act.
(4) (a) No cigarettes in containers bearing the stamp
impression referred to in subsection (2), may be entered for removal
in bond
as contemplated in section 18 for transit through the
Republic.
(b) Any cigarettes in containers bearing such stamp
impression so entered for removal in bond shall be liable to
forfeiture in accordance
with the provisions of this Act.
(As
mentioned, the Commissioner does not appear to have exercised the
authority conferred on him in terms of s 35A(1)(b) or
s 54(1)(b)
of the Act.)
[16]
The most notable characteristic of Inspector Olkers’ letter of
30 May 2011 is that it stopped short of advising
that the goods
that the applicant wanted released had been seized as forfeit.
The effect of the letter was to advise that
the goods were to be
retained in detention.
[17]
After receipt of the letter from Inspector Olkers the applicant filed
a notice in terms of s 96(1)(a) of the Act on 11
July 2011.
The giving of notice in terms of this provision is a prescribed
precondition to the valid institution of litigation
against the
revenue authority for anything done or arising out of action taken in
terms of the Act. SARS requested time to
deal with the
investigation into the matter.
[18]
On 9 September 2011, Mr Olkers wrote again to the applicant’s
attorney. He referred back to his aforementioned
letter of 30
May 2011 and advised that because the invoices and bill of entry
supplied could not be reconciled with the cigarettes
that had been
detained, the cigarettes were being seized in terms of s 88(1)(c)
read with s 87 of the Act. The
applicant’s
attorneys’ attention was directed to the provisions of ss 89
and 90 of the Act, which deal with the
disposal of seized goods and
prescribe steps that an affected party must take if it wishes to
challenge the seizure or disposal
of the goods. It is evident,
in my view, that Olkers cannot have been aware when he purported to
seize the goods that SARS
had received a notice in terms of
s 96(1)(a) of the Act and had asked (through one Ms Makhala
Moloi, a manager Customs
and Excise: Litigation at SARS) for time to
consider its position. That no doubt explains the despatch of a
letter by SARS
on 16 September 2011, withdrawing the notice of
seizure.
[19]
By letter dated 6 October 2011, SARS then advised the applicant
that it intended to seize the Chicago branded cigarettes
that it had
detained on 22 September 2010. SARS invited the applicant
to provide further information in respect of the
other cigarettes.
The letter in question read as follows:
NOTICE OF INTENTION TO SEIZE –CIGARETTES IN
TERMS OF SECTION 88(1)(C) OF THE CUSTOMS AND EXCISE ACT 91 OF 1964
We refer to our Notice of Detention dated 22 September
2010 and various communications between you, your client and SARS.
Kindly be informed that this office intends to seize the
Chicago cigarettes which were detained on the 22 September 2010.
At this stage it is not clear to SARS that any duty has
been paid on these goods as we could not reconcile the invoices and
bills
of entries supplied to the detained goods. This office
therefore requests that your client furnishes them with documents in
terms of Section 101 and 102 of the Customs and Excise Act in order
for them to reconcile the invoices, bills of entries supplied
to the
detained cigarettes (sic).
As mentioned in previous correspondences (sic) we hold
the view that some of the invoices supplied do not to conform to the
requirements
mentioned in Section 41(2) of the Customs and Excise Act
in that the invoice need (sic) to indicate code, description,
character
or other marks.
Furthermore, the following cigarettes were detained on
even date:
a)
48 Master
cases and 47 Bricks: Mega Blue cigarettes;
b)
80 Master
cases and 48 Bricks: Pacific Blue cigarettes;
c)
97 Master
cases: Chicago cigarettes;
d)
34 Master
cases: Kingdom cigarettes;
e)
718 Bricks,
67 packets (20’s) and 1 packet (10’S): Wild Horse
cigarettes;
f)
41 Master
cases: Seville’s cigarettes;
g)
3 Master
cases and 46 Bricks: House of Seba cigarettes.
h)
1 Master case
and 22 Bricks: Sunset cigarettes;
i)
24 Bricks and
7 Packets (20’S): Tradition of Seba cigarettes;
j)
5 Bricks and
7 packets (20’S): Boston cigarettes; and
k)
3 Bricks and
6 packets (20’s): New York cigarettes;
This office would appreciate if your client can (sic)
identify the cigarettes it alleges belongs to them (sic) and provide
proof
of documentation as requested in paragraph 3 of this letter
above.
Your client should also provide this office with the
following documents:
·
Invoices linked to the detained
cigarettes;
·
Proof of ownership of the cigarettes;
·
Purchase agreements if the cigarettes were
bought from someone;
·
Bills of entry and any other documentation
that might be useful to us
Your client is therefore invited to make representation
in regard to any aspect herein before this office can make its final
decision
to seize.
This office therefore grants your client 14 days from
date of this letter within which your client has to supply us with
the requested
documentation to enable us to make an informed and
final decision in this matter.
It is
clear from the content of the letter that, unlike the notice given on
9 September 2011, it did not constitute a notice
of seizure,
merely the giving of notice of an intention to seize. It is
furthermore apparent from the content of the letter
that the
respondent had at that stage not established whether duty had been
paid on the cigarettes or not. In my view the
letter of
6 October 2011 did not advance matters in any substantive sense
from the situation which obtained from the initial
detention of the
goods. The respondent avers that the letter of 6 October 2011
should have referred to all the detained cigarettes
and not just the
Chicago cigarettes. In the circumstances I do not consider that
anything turns on that.
[20]
The applicant contends that the withdrawal of the notice of seizure,
dated 9 September 2011, had the effect that SARS had made
a
determination in respect of the cigarettes on which it was not
permitted to go back. The applicant contends that the
withdrawal
of the notice of seizure entitles it to the return of the
cigarettes. I do not agree with this contention. The
reason
for the withdrawal of the seizure notice is evident, as
explained in the previous paragraph. In terms of s 93(1)
of
the Act the Commissioner may release detained goods on good cause
shown. There was nothing in the aforementioned communications
between SARS and the applicant’s attorneys that indicated that
SARS had completed its investigations in respect of the detained
goods and decided to release them. The decision that the
applicant would have to show had been made by SARS to release the
detained goods has not been established. The applicant’s
contention thus cannot be sustained.
[21]
The alternative contention of the applicant is that SARS’s
expressed reliance on s 41(2) of the Act in the circumstances
is
misplaced. The applicant points out, correctly, I think, that
SARS has sought to employ s 41(2) of the Act in the
circumstances to place an onus on the applicant to prove that the
cigarettes in issue were lawfully imported or lawfully manufactured
and introduced into the local market in terms of the applicable
excise duty provisions of the statute. The applicant contends
that s 41(2), properly construed, places no onus on it in that
respect because it is not an exporter or manufacturer as referred
to
in the provision. The respondent, on the other hand, as I
understood the argument advanced on his behalf, sought to find
support for his officials’ reliance on s 41(2) in the
approach adopted by the court in
Commissioner, South African
Revenue Service v Saleem
[2008] ZASCA 19
;
2008 (3) SA 655
(SCA), of which I shall
treat presently.
[22]
Section 41(2) resorts in chap. V of the Act, which is entitled
‘
Clearance and Origin of Goods; Liability for and Payment of
Duties
’. The chapter comprises of sections 38 to 54
of the Act. Section 41 is one of the provisions contextually
relevant
to those provisions in the chapter that regulate the entry
of dutiable goods (which covers both goods subject to import and
export
duty) (s 38); the duty of any person entering such goods
to produce documents and pay duties (s 39) – one of the
class of documents which such a person is required to produce is
‘
invoices as prescribed
’ (see s 39(1)(c));
the invalidity of entries which have not been in a manner strictly
compliant with the requirement
of the Act and how errors made in this
connection may be corrected (s 40); entry by bill of sight in
cases where an importer
is able to make a declaration that he cannot,
for want of full information, make due entry of any goods (s 42);
the disposal
of goods on failure of the person responsible to make
due entry, or goods imported in contravention of any other law and
seized
and abandoned goods (s 43); the determination of
liability for duty (ss 44 and 44A); the determination of duty
applicable
and its payment (ss 45, 46A and 47), the
determination of origin of goods (s 46) and the prohibition of
any dealing in
goods which have not been duly entered (s 47A).
Apart from s 54, which provides for special provisions regarding
the importation of cigarettes, the remainder of chap V is
concerned with matters quite unconnected with s 41, such as
international tariff and customs agreements and joint one-stop or
juxtaposed international land border posts.
[23]
It is evident that the relevant bill of entry provisions applicable
to importers of dutiable goods apply in an essentially
equivalent
manner to the removal from a customs and exercise warehouse
[7]
of locally manufactured goods subject to excise duty (see s 38(4).
A prescribed or approved certificate or invoice from
the owner of the
goods is required.
[24]
Section 41(1) requires the exporter of any goods imported into or
exported from South Africa or the owner of any excisable
goods to
‘
render a true, correct, and sufficient invoice, certificate
of value and certificate of origin of such goods in such form and
declaring
such particulars of such goods as may be prescribed in the
rules and as may be necessary to make a valid entry of such goods and
shall furnish such additional information in connection with such
invoice, certificate, particulars or goods as the Commissioner
may,
for the purpose of this Act, require at any time: Provided that
different requirements may be prescribed in the rules in respect
of
invoices and certificates relating to goods of different classes or
kinds or goods to which different circumstances specified
in the
rules apply
’. It is clear, in my view, that the
particularity which s 41(2) contemplates must appear on the
prescribed invoices
referred to in the subsection is particularity
which must be reflected on the invoice required in terms of s 41(1).
It is the invoice that any importer of cigarettes is required in
terms of s39(1)(c) of the Act to deliver when delivering the required
bill of entry to the Controller, or which any person removing goods
from a customs and excise warehouse, as contemplated in terms
of
s 38(4), must deliver in terms of s 39(2A). The
prescribed requirements in respect of such invoices are to be
found
in the rules made by the Commissioner under the Act. Rule 39.04
provides ‘
Any invoice or number of invoices presented to the
Controller in respect of goods imported into the Republic shall be
accompanied
by a statement reflecting a summary of all the invoices
relating to such goods including the total value of each invoice to
which
such statement relates, as well as all the charges (including
freight, insurance and commission) and full particulars of the marks
and numbers of the containers or packages concerned
’.
[25]
Rule 41 provides :
Requirements regarding invoices
41.01 Any person entering any goods imported or to be
imported shall produce to the Controller at the time of presenting
the bill
of entry in question an original invoice from the supplier
of the goods showing all particulars required in terms of these
rules.
41.02
(a) Invoices issued in
respect of the sale, disposal, supply or transfer of excisable goods
shall be in such form for each class
or kind or such goods as the
Controller may require.
(b) All invoices in respect of good specified in Section
B of Part 2 of Schedule No.1 intended for export or for incorporation
in
an unused condition in other such goods shall show the duty paid
to the Office separately.
(c) If invoices in respect of the sale, disposal, or
supply of goods specified in Section B of Part 2 of Schedule No.1
show the
duty specified in Section B of Part 2 of Schedule No.1
separately such duty shall represent the exact amount paid to the
Office.
41.03
Any person entering any
goods for export shall produce to the Controller at the time of
presentation of the bill of entry in question,
an invoice containing
the particulars as the Controller may require.
41.04
An invoice
required in terms of the provisions of rule 41.01 shall not be taken
as satisfying the requirements of that rule if it
does not contain,
in addition to any proprietary, or trade name of such goods, a full
description of the nature and characteristics
of such goods together
with such particulars thereof as are required to assess the duty due
and to compile trade statistics.
41.05
Any particulars on any
invoice in respect of any imported goods shall be in one of the
official languages.
[26]
Rule 35A.05 makes the provisions of rule 36.04, which pertains to the
manufacture of beer, applicable
mutatis mutandis
in respect of
any removal of manufactured tobacco ex warehouse. Rule 36.04
provides ‘
Invoices reflecting the names of the licensee and
consignee, quantity, date, trade name, type of packaging and such
other particulars
as the Controller may require, shall be completed
by every manufacturer to cover all beer removed from any customs and
excise manufacturing
warehouse, and copies of such invoices shall at
all times be available for inspection by the Controller
’.
[27]
Counsel did not draw my attention to any other provisions in the
rules concerning the prescribed requirements in respect of
invoices
that might be applicable in the current circumstances. Thus
there is nothing in the rules of which I am aware that
would derogate
from the interpretation that I have given s 41(2) of the Act.
It is doubtful anyway whether it would
be proper to use the rules to
construe the governing provisions of the statute itself.
[28]
In
Saleem
supra, the party seeking to recover the goods in
issue in that case was accepted to have been a person established as
having had
‘
a beneficial interest in the said stock during
the importation thereof
’, which I understand to mean that
if he was not the importer he was nevertheless closely connected to
the process of importing
the goods; see
Saleem
at para. 11.
One can readily understand in that context why the court considered
that the party concerned should have
been in a position to furnish
the officers who had detained the goods with the documentation
establishing that the imported goods
involved were the subject of a
valid bill of entry – the party would in any event qualify as
the ‘
importer
’ within the meaning of the Act, see
paragraph (e) of the definition of importer in s 1 of the Act.
[29]
The position in the current matter is materially distinguishable on
the facts from that which obtained in
Saleem
. In the
current matter there is no suggestion that the applicant qualifies as
the importer or the manufacturer of the cigarettes
it seeks to have
released, or that it had a ‘
beneficial interest’
[8]
in them at the time of their importation or manufacture.
[30]
Section 41(2) does not require someone in the position of the
applicant to be in possession of a prescribed invoice of the
nature
contemplated in terms of the relevant provisions of chap. V of
the Act. I have therefore concluded that the respondent’s
reliance on s 41(2) is indeed misplaced.
[31]
That is not to say, however, that the applicant was not under any
obligation in respect of the investigation into the regularity
of the
detained goods to which it lays claim. As pointed out by
Combrinck JA in
Saleem
, at para. 10, ss 101 and
102(1) of the Act have relevance. Section 101 requires any
person carrying on business
in the Republic to keep such books,
accounts and documents relating to his transactions as the
Commissioner may prescribe by rule
and to retain them in possession
for such period as may be prescribed by rule. These documents
must be produced to the Controller
or the Commissioner upon demand.
In related vein s 102(1) of the Act places a duty on anyone
selling or dealing in imported
or excisable goods to produce on
request by an officer proof as to the person from the goods were
obtained ‘
and if he is the importer or manufacturer or
owner, as to the place where the duty thereon was paid, the date of
payment, the particulars
of entry for home consumption and the marks
and numbers of the cases, packages, bales and other articles
concerned, which marks
and numbers shall correspond to the documents
produced in proof of the payment of the duty
’.
[32]
The applicant indicated to the respondent whence it obtained the
cigarettes. The respondent’s counsel submitted
that was
not enough. Counsel argued that the applicant was an ‘owner’
within the meaning of s 102(1) and
had failed to furnish the
particulars required in terms thereof. I do not think that the
word ‘
owner
’ in the context in question has an
unrestricted meaning. This is apparent when the provision is
considered in the context
of the Act as a whole. The provision
places an obligation not on any dealer in imported or excisable
goods, only on those
who are the importers or manufacturers or owners
of the goods in question. Importers are the persons responsible
for the
payment of duty on imported goods (see s 39(1)(b) of the
Act) and manufacturers are liable for the payment of excise duties.
Section 44(8) provides: ‘
The manufacturer, owner, seller or
purchaser of any excisable goods or fuel levy goods shall, subject to
the provisions of Chapter
VII, be liable for the duty on such goods,
and his liability shall continue until such goods have been duly
entered and the duty
due thereon paid
’ and s 44(8A)
provides : ‘
Notwithstanding anything to the contrary in this
Act contained, any person who owns, purchases, removes, receives,
takes, delivers
or deals with or in any imported goods or excisable
goods which should have been duly entered in any other Member State
of SACU,
shall be liable for the duty on such goods brought into the
Republic from such State, and if the question arises whether such
goods
have been duly entered, it shall be presumed, unless the
contrary is proved, that such goods have not been so entered, and
such
goods shall be subject to the provisions of this Act as if they
were goods which have, contrary to the provisions of subsection
47A
(1), not been duly entered in the Republic
’.
[9]
It is plain, in my view, that an ‘
owner
’ in this
context is a person who owns the goods when duty on them originally
became payable. The liability of such
owners continues until
the duty is paid. It is not a liability that falls upon any
person to whom they may subsequently transfer
the goods; for such
persons would not have any original liability which would be
susceptible to ‘continuation’.
The provisions of
s 102(1), and in particular the word ‘
owner
’
therein, fall to be understood in this context. Regard to the
context makes for a sensible understanding of the grouping
within
s 102(1) of an ‘owner’ together with an ‘importer’
or ‘manufacturer’ for each of
them in the relevant sense
is a person originally liable for the payment of the duty. By
contrast, to construe the provision
as the respondent’s counsel
would have it would place an extraordinary and inexplicably onerous
burden on persons who had
no connection with the importation or
manufacture of the goods and no obligation to have ensured payment of
the duty, or to present
a prescribed invoice. Such an
unreasonable object is unlikely to have to be intended, which
militates against the construction
that the respondent would seek to
ascribe to the provision. A further reason for holding against
the respondent’s construction
is that its constitutional
sustainability, assessed in the context of the fundamental rights
conferred in terms of s 33(1)
of the Constitution, is doubtful,
to say the least.
[33]
In the result I have concluded that the approach of the respondent
which has been to maintain that there is an onus on the
applicant to
prove that duty has been paid on the cigarettes and that they have
been lawfully entered for consumption in South
Africa is misplaced.
The respondent’s counsel’s emphatic reliance in that
regard on paragraph 13 of the judgment
in
Saleem
supra, where
Combrinck JA, writing for a unanimous court, stated ‘
I
therefore take issue with the judge in the court below that
[the
officer in the employ of the Commissioner]
had to do more by way
of investigation than wait for documentary proof from respondent in
order to establish that the goods were
illegally imported. I also
cannot agree that there was an obligation on
[the officer in the
employ of the Commissioner]
to accompany respondent to his
suppliers. As stated earlier, respondent was under a statutory duty
to maintain books of account
and documents to reflect from whom the
goods were purchased. These provisions, I suggest, were introduced in
the Act for the very
purpose of facilitating the policing of the
importation of goods into the country. The respondent’s
inability to produce
any such documents together with the suspicious
conduct recorded above, were in my view sufficient grounds for
[the officer in the employ of the Commissioner]
to reasonably
conclude that the goods were liable to forfeiture. He was therefore
entitled to seize them
’, is also misplaced. As
observed earlier, the submission overlooks the materially
distinguishing features of the two
cases. In
Saleem
the
person expected to provide the relevant information was plainly ‘the
owner’ or ‘importer’ of the goods,
within the
meaning of s 102(1); the applicant, as I have found, was not.
Paragraph 13 of the judgment in
Saleem
falls to be understood
in that context.
[34]
It is necessary next to consider respondent’s counsel’s
reliance on the onus provisions of s 102(4) of the
Act.
They read as follows:
If in any prosecution under this Act or in any dispute
in which the State, the Minister or the Commissioner or any officer
is a
party, the question arises whether the proper duty has been paid
or whether any goods or plant have been lawfully used, imported,
exported, manufactured, removed or otherwise dealt with or in, or
whether any books, accounts, documents, forms or invoices required
by
rule to be completed and kept, exist or have been duly completed and
kept or have been furnished to any officer, it shall be
presumed that
such duty has not been paid or that such goods or plant have not been
lawfully used, imported, exported, manufactured,
removed or otherwise
dealt with or in, or that such books, accounts, documents, forms or
invoices do not exist or have not been
duly completed and kept or
have not been so furnished, as the case may be, unless the contrary
is proved.
[35]
Whether the respondent can rely on s 102(4) depends on whether
the current proceedings can properly be characterised as
a dispute
between the applicant and the respondent in which the question has
arisen whether the proper duty has been paid or whether
any of the
other matters mentioned in the provision have been done. The
current proceedings raise the question whether it
is reasonable for
the respondent to continue to hold the detained goods.
[36] I
do not consider that s 102(4) is of application in respect of
the question in issue in this case. It seems clear
that the
goods are in detention because the respondent considers that the
applicant has failed to produce documentation proving
that the
imported goods were duly entered and import duty paid thereon.
As I have sought to explain, the respondent’s
approach to the
detention of the goods has been premised on a misdirected
understanding of the extent of the obligations on the
respondent
under the Act in the particular circumstances. It was for the
respondent, not the applicant, to establish within
a reasonable
period whether the goods were liable to seizure; in other words,
whether they were goods that had been irregularly
dealt with within
the meaning of s 87(1), and, if they were, to seize them.
The onus in terms of s 102(4) does
not arise where it is evident
that that the respondent has not confirmed what he had only
reasonably to suspect in order to detain
the goods. Section 88
read with s 87 of the Act places the onus on the respondent to
establish that detained goods are
indeed susceptible to forfeiture.
Answering the question whether the detention of the goods has endured
longer than reasonably
necessary for the respondent to establish that
the goods are liable to forfeiture does not require a determination
as to whether
or not the duty has been paid.
[37]
In all the circumstances it is clear that the respondent’s
dealing with the duty upon it to establish whether the detained
cigarettes had been irregularly dealt with in terms of the Act
proceeded on a misconception of the applicable provisions of the
statute. A reasonable period to establish whether the goods
were irregularly dealt with posits an efficiently active approach
to
the required investigation by the respondent. It is apparent
from the evidence that this has either not occurred, alternatively
if
it did occur (which as I say is not apparent) it has not given a
conclusive result. There is nothing to show that the
Chicago
cigarettes were dealt with irregularly. They appear to have
been locally manufactured by the Gold Leaf Tobacco Company
and there
is nothing to show that the manufacturer has fallen foul of its
relevant obligations in respect of the payment of excise
duty.
With regard to the imported brands of cigarettes the respondent’s
investigations seem to have been impeded by
the absence of batch or
code numbers by which the particular cigarettes in issue might be
linked to prescribed invoices delivered
together with the pertinent
bills of entry. The respondent’s counsel were unable,
however, to direct my attention to
any provision in terms of the Act
or the rules which requires containers of cigarettes to be
identifiable by such particulars.
I have concluded that the
respondent has had a reasonable period within which to establish that
the goods in question were dealt
with irregularly and that in the
circumstances its failure to do so, alternatively, having established
that some of them were so
dealt with, to seize them, entitles the
applicant to an order for their release from detention.
[38] I
should mention that each party contended that various passages in
affidavits in the papers of the other should be struck
out. I
have not found it necessary to address that issue, save with regard
to the application to strike out the respondent’s
fourth set of
affidavits. It was not necessary to rely on the contentious
material to decide the case. Accordingly,
neither party has
been prejudiced by it. The respondent filed a fourth set of
affidavits in the matter. The applicant
had consented to this,
apparently without knowledge of what the content thereof would be.
The applicant, as also agreed between
the parties, was given a
consequent opportunity to respond to the fourth set, which it did.
The fourth set of affidavits
concerned various investigations
undertaken by the respondent’s officer, De Villiers, during mid
2012, into the applicant’s
income tax and value added tax
compliance. These are not matters centrally germane to the
current case. The only relevant
point sought to be made in the
fourth set was to contest the applicant’s assertion of
ownership in the subject goods.
On the basis of answers to
interrogatories addressed by De Villiers to the sole member of the
applicant close corporation, the
respondent argued that the applicant
was not the owner thereof. These allegations were denied in the
fifth set of affidavits.
The conclusion contended for by the
respondent in the fourth set of affidavits is argumentative. It
is founded on the respondent’s
construction of ambiguous
material. I do not consider that the further paper took the
case anywhere. Even if the applicant
were accepted not to be
the owner, it is clear on any interpretation of the answers to De
Villiers’ interrogatories that
it would receive a dividend upon
the sale of the impounded cigarettes and that it thus has a
sufficiently beneficial interest in
the goods to have standing to
seek their release.
[39] In the result the following order is made:
1. The respondent is directed to release to the applicant the
following goods included in the inventory, dated 22 September
2010, a copy of which was annexed as annexure NHR4 to the applicant’s
founding affidavit:
1.1 48 master cases of Mega Blue 20’s cigarettes;
1.2 47 bricks of Mega Blue 20’s cigarettes;
1.3 97 master cases of Chicago 20’s cigarettes;
1.4 34 master cases of Kingdom 20’s cigarettes;
1.5 41 master cases of Seville 20’s cigarettes.
2. The respondent shall be liable to pay the applicant’s costs
of suit.
A.G.
BINNS-WARD
Judge
of the High Court
[1]
A ‘master case’ in the tobacco industry denotes a
container containing 50 ‘bricks’. A ‘brick’
is also commonly referred to as a ‘carton’. Each
‘brick’ in turn contains 10 packets of cigarettes,
each
containing 20 cigarettes.
[2]
The description of the applicant’s business
is quoted from the founding affidavit of its sole member,
Nicolaas Hendrik
Roos.
[3]
In terms of s 35A(2)(a) of the Act, no
cigarettes may be removed from a customs and excise warehouse for
home consumption
unless a stamp impression determined by the
Commissioner has been made on their containers. In terms of
s 54(2)(a),
if entered for home consumption, cigarettes may not
be imported unless a stamp impression determined by the Commissioner
has
been made on their containers. Section 54(1)(b) of the Act
authorizes the Commissioner to prescribe by rule ‘
distinguishing
marks or numbers in addition to the stamp impression referred to in
subsection (2) which must or must not appear
on containers of
imported cigarettes
’. My
attention was not directed to any provision that indicates that the
Commissioner has exercised his authority
in terms of s 54(1)(b).
[4]
Health warnings are required in terms of the
regulations made in terms of the
Tobacco Products Control Act 83 of
1993
.
[5]
Customs Border Control Unit.
[6]
See para. [1], above.
[7]
In terms of s 19 of the Act
[8]
For the significance of the expression
‘beneficial interest’ see para. (e) of the
definitions of ‘exporter’
and ‘importer’,
respectively, in s 1 of the Act.
[9]
See also s 38(4)(a) of the Act in respect of
the removal of excisable goods from a customs and excise warehouse
upon the
issue by the owner of a prescribed invoice or certificate.