The importance of disclosing all relevant information to the Commissioner for the South African Revenue Service (the Commissioner or SARS where applicable) was once again highlighted in the recent decision taken in the Kwa-Zulu Natal High Court in the matter between Sikander Trading Company Limited and The Government of the Republic of South Africa, Sirpat Investments CC and CH Sikander Traders CC.
 

Sikander Trading Company Limited (Sikander) contended that it was the owner of 58 second-hand motor vehicles which it imported into South Africa from Japan. These vehicles were imported with the intention of finding purchasers for them in countries outside the South African customs union. No import duty or VAT would be payable on the vehicles upon importation into South Africa, provided that the vehicles were stored in a special customs and excise warehouse.
 

Upon arrival of the vehicles in South Africa, the vehicles were taken to a warehouse operated by Sirpat Investments CC (Sirpat Investments) in terms of an agreement concluded in July 2009 between Sirpat Investments and CH Sikander Traders CC (Sikander Traders) who acted as Sikander's agent in South Africa.
 

Following an inspection by officials of the Controller of Customs in Durban (the Controller) on the 10th April 2010, the vehicles were detained in terms of section 88(1)(a) of the Customs and Excise Act, No. 91 of 1964 (the Act) and were thereafter seized by the Controller on the 28th of April 2010 in accordance with the provisions of section 88(1)(c) of the Act.
 

Sikander's attorneys then wrote a letter to the Commissioner applying for the 58 vehicles to be released in terms of section 93(1) of the Act subject to certain conditions. When after about one month, no decision was forthcoming from the Commissioner regarding Sikander's application in terms of Section 93(1), Sikander launched an application to the High Court, to compel the Commissioner to make a decision on Sikander's application to have the vehicles released in terms of section 93 of the Act (ie. as provided for in section 6(2)(g) of the Promotion of Administrative Justice Act, No. 3 of 2000).
 

Section 93 of the Act provides that, the Commissioner may on good cause shown deliver seized goods to the owner, who has the burden of proving such ownership to the satisfaction of the Commissioner. Prior to launching these proceedings, Sikander had failed to adequately satisfy the Commissioner that it was the lawful owner of the vehicles, which resulted in the Commissioner's delay in making a decision in terms of section 93. Wallis J held at par12 that "It is not apparent to me that it is open to a person seeking relief under s 93(1) to complain that the Commissioner has taken an unreasonable time to make a decision under that section when it is clear that the Commissioner is not satisfied of that person's ownership of the goods concerned. Only once the Commissioner is satisfied on that point is it open to the Commissioner to consider such an application on its merits."
 

In any event, SARS detained the motor vehicles on the basis that i) they were stored in a bonded warehouse which was not the property of the licensee; ii) Sikander entered into a contract with Sirpat without the Controller's permission; iii)the bond register was not available at the time of the inspection and the vehicles were also not parked in numbered bays.
 

Sikander tried to argue that these contraventions were 'irrelevant to the facts at hand' and also involved administrative contraventions on Sirpat's licence 'in relatively minor respects'. Wallis J rejected these arguments on the basis that as Sikander was the party that wished to benefit from removing the vehicles in bond and then exporting them out of South Africa, without incurring an obligation to pay import duty or VAT, and the onus rested on Sikander to ensure compliance with Act. Furthermore, the Commissioner requested Sikander to furnish documents to provide clarity on the nature of the relationship between Sikander and Sirpat and how this agreement between the parties was to be implemented. This information was crucial for the Commissioner to make a decision regarding Sikander's application in terms of section 93(1).
 

Sikander's argued that the Commissioner was on "...a fishing expedition rather than a bona fide attempt at dealing with the issues at hand.", and that the Commissioner already had all the relevant customs clearance documents in its possession.
 

Evidently SARS was of the view that relevant documents were not handed over to them. Wallis J held that the Commissioner requested information that on the face of it was significant to a proper consideration of Sikander's application under section 93(1), which information would assist him in reaching a fair decision.
 

The Commissioner's request for information, prior to making a decision cannot be faulted. Accordingly, there was no unreasonable delay by the Commissioner in making a decision and the application was dismissed with costs.
 

The lesson to be learnt is that before rushing off to Court, one must ensure that all requested information is furnished in full to SARS. If not, you will in all likelihood end up with the same result as that experienced by Sikander.

 

Notes:

• Cliffe Dekker Hofmeyr is one of the largest commercial law firms in South Africa with some 115 directors/partners and 250 qualified lawyers located at offices in Johannesburg and Cape Town.

• Cliffe Dekker Hofmeyr lawyers specialise in services covering the complete spectrum of business legal needs in 11 core areas of practice. The firm also has dedicated sector-led teams consisting of lawyers with experience in a wide range of industries and the public sector.

• Cliffe Dekker Hofmeyr is the South African member firm of DLA Piper Group, an alliance of legal practices, which includes firms with offices around the globe that are affiliated to members of the DLA Piper Practice but are not themselves members of it.

• Cliffe Dekker Hofmeyr's Africa practice, in conjunction with DLA Piper Africa Group, is unrivalled in terms of pan-African legal services and geographical coverage.

• DLA Piper is an international legal practice with over 3,500 lawyers located in 30 countries and 69 offices throughout Asia, Europe, the Middle East and the US.

Written by Freek van Rooyen, Director and Cara Maeve Gilmour, Candidate Attorney in the Tax Practice at Cliffe Dekker Hofmeyr business law firm