Judgment summary
The applicant, Contract Packing Solutions CC, brought an urgent application in the Gauteng High Court, Pretoria, seeking an interim order permitting it to resume its non-alcoholic energy drink manufacturing and canning operations pending the institution of a review application against SARS. The applicant also sought a reduction of the notice period prescribed in section 96(1)(a)(i) of the Customs and Excise Act 91 of 1964 to enable the matter to be heard urgently.
The application arose from a search and seizure warrant executed by SARS officials at the applicant's premises on 28 January 2025, following which SARS closed the entire business operation, detained plant, machinery and goods under section 88(1)(a) of the Act, and secured the premises under section 4(12) of the Act.
The court held that the matter was urgent and reduced the section 96(1) notice period. However, having considered the requirements for an interim interdict, the court found that the applicant had not established a prima facie right, that the balance of convenience did not favour the granting of interim relief, and that the applicant had an alternative remedy in damages. The application was dismissed with costs.
Background
The applicant is a close corporation that has operated for approximately twenty years, conducting bottling and packaging of energy drinks and ready-to-drink (RTD) alcoholic beverages at Unit 7 and Unit 6, Union Street, Alberton North [10, 16, 17]. It employs approximately 70 persons and operates on a 24-hour, two-shift basis [10].
The applicant holds a micro manufacturers' licence issued by the Gauteng Liquor Board in terms of the Gauteng Liquor Board Act 2 of 2000 [11]. Approximately 98% of its business consists of manufacturing, canning and packaging non-alcoholic energy drinks for the fourth respondent, Alternative Power (Pty) Ltd (trading as Switch) [13]. The remaining work includes bottling RTD alcoholic beverages on behalf of Halewood International South Africa (Pty) Ltd, which constitutes less than 2% of the business [12].
On 17 January 2025, Diageo South Africa (Pty) Ltd delivered 30 501 litres of 94% absolute alcohol (AA) to the applicant's premises pursuant to a prospective bottling agreement, though no processing of that product had commenced due to equipment failures [14].
Pursuant to a warrant issued by the Magistrate's Court at Palm Ridge on 23 January 2025, SARS officials entered the applicant's premises on 28 January 2025 [19]. They detained plant, machinery and goods under section 88(1)(a) of the Act, closed and secured the entire premises including Unit 6 under section 4(12) of the Act, prohibited the applicant access, and engaged Royal Security to guard the premises [19, 20]. On 30 January 2025 SARS returned to conduct an inventory of alleged illicit products, and the applicant received a copy of the inventory on 31 January 2025 [21].
The applicant served a section 96(1) notice on SARS on 3 February 2025 and made written representations [23]. A meeting was held on 5 February 2025, at which SARS requested further information and granted the applicant until 14 February 2025 to provide documentation, without indicating when a decision on the resumption of business operations would be made [24]. The applicant launched the urgent application on 6 February 2025 [39].
Core dispute
The central dispute was whether the applicant was entitled to an interim interdict permitting it to resume its non-alcoholic energy drink canning operations notwithstanding SARS's closure of its entire premises and the detention of its plant, machinery and goods under the Customs and Excise Act 91 of 1964.
The applicant argued that its energy drink canning operation fell entirely outside the scope of the SARS investigation and the Act, that SARS had exceeded its powers by closing down operations unrelated to any alleged contravention, and that the closure of 98% of its legitimate business was prima facie unlawful [50, 51, 68].
SARS contended that the applicant had engaged in activities requiring a licensed customs and excise manufacturing warehouse, including the mixing and blending of alcohol spirits and the manufacture of sugary beverages subject to the Health Promotion Levy (HPL), that the applicant's premises were not licensed for these activities, and that the detention of the entire operation was authorised under section 88 and section 4(12) of the Act [55, 59, 65, 66]. SARS further argued that the applicant had not challenged the validity of the detention, and therefore had no prima facie right to the relief sought [67, 83].
A subsidiary dispute concerned whether the applicant was required to be registered as a manufacturer of sugary beverages and whether its energy drinks exceeded the sugar threshold of 4 g per 100 ml under the Health Promotion Levy provisions [62, 63, 69, 70, 71].
Court findings
The court found the matter sufficiently urgent to be enrolled under Uniform Rule 6(12) [37]. It further found that it was in the interests of justice to reduce the period stipulated in section 96(1)(a)(i) of the Act, consistent with its finding on urgency [46].
On the question of a prima facie right, the court found merit in SARS's argument that the applicant had not established such a right to resume its energy drink operations because that right had been affected by the detention under section 88 of the Act, which the applicant had not challenged in these proceedings [83]. The court noted that three emails dated 1 March 2024, attached to the replying affidavit, disclosed mixing and blending activities in respect of both alcohol and sugary beverages, and that there was prima facie evidence for SARS to believe that unlawful activities had been taking place at the premises [77].
Regarding the test report attached as annexure FA11 to the founding affidavit, the court observed that the document indicated a sugar mass concentration of 48.1 g per litre, exceeding the HPL threshold, and that SARS officials had been present when those tests were performed. The court found that SARS could not be faulted for acting on that information at the time [73]. The court noted that the applicant subsequently sought to rely on different laboratory certificates in its replying affidavit showing sugar content below the threshold, but did not resolve this factual dispute [69, 73].
On the balance of convenience, the court found that the prejudice to SARS if the interim interdict were granted outweighed the irreparable harm to the applicant if it were refused, in that granting the order would frustrate SARS's ongoing investigation and risk the disappearance of detained goods [87, 89].
On the availability of an alternative remedy, the court was persuaded that the applicant retained a right to claim damages for losses arising from any actions of SARS officials that were not bona fide [90].
The court concluded that the applicant had failed to satisfy the requirements for the granting of interim relief [91].
Outcome
The application was dismissed with costs. Costs were granted for the employment of two counsel, one on Scale C and one on Scale B [92, 93].
Major issues / areas of contention
- Whether the application qualified for urgent hearing under Uniform Rule 6(12) and whether the notice period in section 96(1)(a)(i) of the Customs and Excise Act 91 of 1964 should be reduced in the interests of justice.
- Whether SARS acted within its statutory powers under sections 4(12) and 88(1)(a) of the Customs and Excise Act 91 of 1964 in closing the applicant's entire business premises, including the non-alcoholic energy drink operation.
- Whether the applicant established a prima facie right to resume its energy drink canning operations, where the applicant had not challenged the validity of the detention notice issued by SARS.
- Whether the applicant's premises required licensing as a customs and excise manufacturing warehouse on account of alcohol blending and mixing activities conducted there.
- Whether the applicant's energy drinks were subject to the Health Promotion Levy (HPL) as sugary beverages under item 191 of Part 7 of Schedule 1 to the Customs and Excise Act, and whether the sugar content of 48.1 g per litre recorded in tests conducted in the presence of SARS officials exceeded the 4 g per 100 ml threshold.
- Whether the balance of convenience favoured the applicant, given the impact of the closure on approximately 70 employees and a claimed weekly income loss of approximately R3 504 592,00, as against SARS's interest in continuing its investigation without interference.
- Whether the applicant had an adequate alternative remedy in the form of a damages claim against SARS.