Judgment summary
The judgment concerns two distinct procedural matters heard together: an interlocutory application by the respondents to strike out specified paragraphs of the applicant's replying affidavit under Rule 6(15) of the Uniform Rules of Court, and the review application proper in which Multipurpose Distributors sought to set aside a SARS letter of demand for R7 985 412.23.
On the strike-out application, the court held that the respondents had not demonstrated that the impugned passages were scandalous, vexatious or irrelevant, nor that their presence caused prejudice in the Rule 6(15) sense. The strike-out application was accordingly dismissed [14].
On the review application, the court upheld SARS's preliminary point that the application was instituted outside the 180-day period prescribed by section 7(1) of the Promotion of Administrative Justice Act 3 of 2000 (PAJA), and that no condonation had been sought or established under section 9 [24]. The application was dismissed on that basis.
The court also considered the merits on an obiter basis and concluded that, even if timeliness were not dispositive, SARS's decision was rational, reasonable and lawful under sections 18 and 64D of the Customs and Excise Act 91 of 1964 (CEA), and was not susceptible to review under PAJA [25]-[29].
Background
Multipurpose Distributors held a licence as a remover of goods in bond. The core events concerned alcohol products declared for export to Mozambique under various export bills of entry processed by Turners Shipping (Pty) Ltd on behalf of Ocean Traders International Africa (Pty) Ltd (OTIA), with Cogef Trading LDA reflected as consignee. Multipurpose was reflected on those export bills of entry as the licensed remover of the goods [17].
Multipurpose had leased trucks to Frimol Logistics (Pty) Ltd (Frimol) pursuant to a truck lease arrangement. Multipurpose averred that its remover code was used without its knowledge or consent and that SARS failed to verify declarations and authorisations properly [18].
SARS disputed this and pointed to: a letter dated 28 September 2020 ostensibly authorising use of remover code 21329136; statements attributed to Multipurpose personnel indicating that the leasing arrangement "comes with" the remover code; and prior communications in November 2017 in which Multipurpose had allegedly authorised certain companies to use its remover code [18].
SARS's audit reflected that for a number of export bills of entry the goods were marked for arrival at the border but never marked for exit on the SARS SSM system; certain CN2 references furnished were allegedly invalid or false because they related to different transactions at other borders; and hard copy electronic road manifests indicated an exit status inconsistent with the SSM record. From this, SARS inferred diversion and raised a demand [19].
Core dispute
SARS issued a letter of demand for R7 985 412.23, comprising customs duties, VAT, interest, penalties and a forfeiture amount under section 88(2)(a) of the CEA, holding Multipurpose liable as the licensed remover of goods in bond in circumstances where the goods were alleged to have been diverted rather than exported [15].
Multipurpose sought to review and set aside that decision under PAJA. In the alternative, it sought remittal to SARS for reconsideration, and ultimately asked the court to replace the impugned decision with a finding that it owed nothing to SARS [15].
SARS raised a preliminary point that the review was out of time under section 7 of PAJA, contending the 180-day period ran from 5 April 2022 when the Internal Administrative Appeal (IAA) under Part A of Chapter XA of the CEA concluded, meaning the review should have been launched by October 2022, whereas it was only launched in January 2023 [21].
On the merits, the dispute turned on whether Multipurpose had authorised the use of its remover code and whether SARS's decision to hold it liable under section 18 of the CEA read with section 64D was rational, reasonable and procedurally fair [20].
Court findings
On the strike-out application, the court found that the respondents conflated admissibility questions with the weighting of competing versions, and that prejudice under Rule 6(15) contemplates unfairness in the litigation process rather than mere annoyance at unfavourable content [9], [13]. The court held that the admission and weight of any hearsay passages were best determined at the review hearing under section 3(1)(c) of the Law of Evidence Amendment Act 45 of 1988 and ordinary motion principles [14].
On the PAJA timeliness point, the court accepted SARS's argument, drawing on the authority of Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd v Commissioner for the South African Revenue Service [2018] ZAGPPHC 871, that Part A of Chapter XA of the CEA does not constitute an "internal remedy" for PAJA purposes and therefore does not suspend the 180-day clock [21], [23]. The court further held that it was not competent for an administrator's letter (the MD11 notice) to unilaterally extend PAJA's time limits, as section 9(1) of PAJA vests that power in the court [23]. The court found that Multipurpose had not sought condonation or set out facts warranting an extension in the manner PAJA contemplates [23].
On the merits (obiter), the court found that SARS's factual basis was substantial: Multipurpose was reflected as the licensed remover on the export bills of entry; several consignments were marked for arrival but never for exit on the SSM system; CN2 references furnished were invalid for the transactions in question; and road manifest exit statuses conflicted with the SSM record [27]. The court found that those facts supported SARS's inference of diversion and that liability under section 18 of the CEA remained because Multipurpose had not produced proof that liability ceased under section 18(3)(a)(i)-(ii) [27].
The court further found that the materials SARS cited provided a plausible evidentiary basis for concluding that Multipurpose at least caused or permitted the removal, satisfying section 18(2) of the CEA and triggering obligations under section 18(3) and section 64D(6) [28]. The applicant's contention that SARS should have verified declarations and authorisations more rigorously before release did not, in the court's view, render SARS's subsequent decision irrational or procedurally unfair [29].
Outcome
The review application was dismissed because it was instituted outside the period prescribed by section 7(1) of PAJA and no condonation under section 9 had been sought or established [31.1].
In the alternative and obiter, the court held that the application would in any event have been dismissed on the merits because SARS's decision was rational, reasonable and lawful under sections 18 and 64D of the CEA and was not susceptible to review under PAJA [31.2].
The applicant was ordered to pay the costs of the review application, including costs of counsel, on the party-and-party scale B [32.3].
The respondents' Rule 6(15) strike-out application was dismissed and the respondents were ordered to pay the costs of that specific application, including costs of counsel, on the party-and-party scale B [31.4].
Major issues / areas of contention
- Whether specified paragraphs of the applicant's replying affidavit, including references to an alleged admission by Ms Karyn Lichaba in or about November 2017 and communications relating to remover codes, constituted inadmissible hearsay and should be struck out under Rule 6(15) of the Uniform Rules of Court [4], [11].
- Whether the impugned passages in the replying affidavit were scandalous, vexatious or irrelevant, and whether their presence caused prejudice within the meaning of Rule 6(15) [5], [13].
- Whether, even if hearsay, the impugned passages should remain by virtue of the statutory discretion under section 3(1)(c) of the Law of Evidence Amendment Act 45 of 1988 or because they were properly responsive to matter introduced by the respondents [5], [12].
- Whether the review application was instituted within the 180-day period under section 7(2) of PAJA, specifically whether the Internal Administrative Appeal under Part A of Chapter XA of the CEA and the subsequent ADR process constituted "internal remedies" that deferred the commencement of the 180-day period [20.1], [21]-[23].
- Whether SARS's MD11 notice, which stated that prescription runs for one year from termination of ADR under section 96 of the CEA, could operate as a written extension of PAJA's time limits under section 9(1) [22], [23].
- Whether, on the merits, SARS's decision to hold Multipurpose liable for excise and customs duties as a licensed remover of goods in bond under sections 18 and 64D of the CEA was rational, reasonable and procedurally fair under PAJA in circumstances of alleged diversion and disputed authorisation of the remover code [20.2], [27]-[29].
- Whether Multipurpose authorised the use of remover code 21329136 by Frimol Logistics (Pty) Ltd or OTIA, having regard to the 28 September 2020 letter, statements by Multipurpose personnel, and prior November 2017 communications [18], [28].