Judgment summary
The applicant, Poseidon Operations (Pty) Ltd, formerly known as Seagull Africa (Pty) Ltd, applied to review and set aside a demand issued by the Commissioner for SARS on 25 July 2020. The demand arose after an inspection at Beit Bridge Border Post revealed that goods declared under a bill of entry for truck AJE1605 were not found on that truck's trailers. SARS levied duties, a penalty and an amount in lieu of forfeiture on the basis that the goods had been diverted without the Commissioner's consent [1].
The court found that the goods had not been diverted and that they had in fact been delivered to the consignee mine in the Democratic Republic of Congo (DRC). It admitted the hearsay evidence relied on by the applicant in the interests of justice, corroborated by a sworn statement from a mine employee who confirmed receipt of the full order [58, 59, 64].
The court also found that SARS had failed to conduct a proper and fair investigation, had levelled unsubstantiated charges against the applicant, and had refused to furnish the applicant with the information underlying those charges despite requests to do so [33, 34, 35]. The application succeeded with costs, and SARS was ordered to remit the penalties and the amount paid in lieu of forfeiture [Order para 4].
Background
During May 2020, as South Africa emerged from COVID-19 Level 5 lockdown, the applicant was engaged by China Manufacturing and Engineering Company Comtrans International Company Ltd (Comtrans), a Beijing-based entity acting as agent for Beijing Sun Rising Trade and Development (Beijing), to assist with the clearance of various goods destined for export to the DRC [13].
The goods arrived at Durban harbour in seven 40-foot containers. The applicant assembled a team of service providers. Kwikfreight Services (Pty) Ltd (Kwik) transported the goods from the harbour to the fourth respondent's warehouse situated at Intermodal's premises. Ziegler South Africa (Pty) Ltd (Ziegler) was appointed to prepare and submit exportation entries to Customs. Rainet Logistics (Pty) Ltd and Beyond Heavy Haulage (Pty) Ltd, both licensed removers of goods in bond under Section 64D of the Customs and Excise Act 91 of 1964 (CEA), were appointed to transport the goods by road to the DRC. Rainet provided three trucks and Beyond Heavy Haulage provided one [14].
Trucks were loaded at the warehouse overseen by Transglobal Africa Logistics (Trans) and Intermodal. A loading error occurred, with goods meant for truck AJE1605 being loaded onto truck AJE1611 and vice versa. In addition, one truck was found to be overloaded at a weighbridge en route to Beit Bridge Border Post, and goods were transferred between trucks to address the overload [17, 18, 21]. Three of the four trucks cleared Beit Bridge with acquittals issued [15].
Truck AJE1605 was identified for a random audit and detained by SARS for approximately five weeks. On 15 June 2020, SARS issued a release for that truck, but then issued a stop notice via the Electronic Data Interchange (EDI) system under Section 4(8A)(a) of the CEA. By the time Ziegler received the stop notice, the truck had already commenced its journey. Beit Bridge Customs stopped and inspected the truck and found that goods declared in lines 3, 4, 8, 9 to 18, and 20 to 23 were not on the trailers, and that of two items in line 5 only one was present. A second physical inspection confirmed this result [16].
Core dispute
The central dispute was whether the applicant had demonstrated, on the evidence before the court, that the goods carried under the declaration for truck AJE1605 had not been diverted to an unauthorised destination but had in fact been exported to and received by the consignee mine in Katanga, DRC, as declared in the SAD 500 [2, 28].
SARS maintained that the goods had been diverted within the meaning of the CEA and that the applicant was liable for duties of R211 030.68, a penalty of R460 263, and an amount in lieu of forfeiture of R1 842 052, totalling R2 512 345.68 [20]. SARS also resisted the application on the ground that it had not been brought within the 180-day period prescribed by the Promotion of Administrative Justice Act 3 of 2000 (PAJA) and that much of the applicant's evidence constituted inadmissible hearsay [1, 27].
The applicant contended that a human loading error, exacerbated by COVID-19 conditions, caused the goods to be interspersed across the four trucks rather than loaded as declared, and that all goods were ultimately received by the mine. It relied on proof of delivery records stamped by DRC border authorities, a letter on Comtrans' letterhead, and a supporting affidavit from Ntumba Eudoxie, an employee of the mine [25, 26, 49].
Court findings
The court held that the review was properly characterised as a PAJA review rather than one based directly on the provisions of the CEA, as the applicant had not identified a specific CEA provision and had not pursued the matter on the basis of legality [37, 38].
On condonation for the late filing of the application, the court found a delay of approximately six months beyond the 180-day PAJA period, measured from the termination of the ADR proceedings on 21 May 2021. Applying an interests-of-justice test, the court granted condonation, citing the importance of the issues, the extraordinary COVID-19 circumstances prevailing at the relevant time, the applicant's favourable prospects of success, the absence of pronounced prejudice to SARS, and the relatively small amount involved [39, 63].
On hearsay evidence, the court conducted the holistic enquiry required by Section 3(1)(c) of the Law of Evidence Amendment Act 45 of 1998 (LEAA). It found that the hearsay records, namely proof-of-delivery documents referenced as Annexures I, J, K, L1 and L2 bearing DRC Ministry of Finance border stamps, and a letter on Comtrans' letterhead referenced as Annexure M, were sufficiently reliable and their probative value was corroborated on material aspects by the sworn affidavit of Ntumba Eudoxie. The court admitted the hearsay evidence in the interests of justice [43 to 58].
The court accepted Ntumba Eudoxie's evidence that he personally oversaw the offloading of the trucks, confirmed receipt of the entire order including goods delayed with truck AJE1605, and authorised payment. The court found that SARS's criticisms of that evidence, taken individually or cumulatively, did not water down its probative value [59].
The court further found that SARS had failed to conduct a proper and fair investigation. It noted that SARS had levelled three unsubstantiated charges, namely that the trucks had bypassed loading arrangements under SARS supervision, that there had been an intention to mislead the Commissioner, and that goods had been loaded into export stacks and returned without permission. SARS declined to furnish the applicant with the basis for those charges despite requests, and proceeded directly to issue a demand [33, 34, 35].
The court found that several of SARS's denials in the answering affidavit were bare and did not raise genuine, bona fide disputes of fact within the Plascon-Evans rule, citing examples such as the denial of COVID-19's impact on warehouses and the initial denial that there was a load plan [55, 56].
The court was satisfied that the purpose of the CEA had not been undermined in the circumstances and that the goods had not been diverted [62, 64].
Outcome
The application succeeded with costs. The court granted condonation to the applicant for the late filing of the application, and to both parties for the late filing of their answering and replying affidavits. The respondent's demand of 25 July 2020 was set aside. The Commissioner was ordered to remit the penalties and the amount paid in lieu of forfeiture [Order paragraphs 1 to 5].
Major issues / areas of contention
- Whether the review application was properly brought under the CEA or under PAJA, and the consequence for the applicable 180-day time limit [37, 38].
- Whether condonation should be granted for the applicant's delay of approximately six months in launching the review application, measured from the termination of ADR proceedings on 21 May 2021 [39, 63].
- Whether the hearsay evidence relied on by the applicant, including proof-of-delivery records bearing DRC border authority stamps and a letter on Comtrans' letterhead, should be admitted in the interests of justice under Section 3(1)(c) of the Law of Evidence Amendment Act 45 of 1998 [43 to 58].
- Whether the applicant demonstrated good cause for remission of the penalties and amount in lieu of forfeiture under Section 93(2) of the Customs and Excise Act 91 of 1964, by showing the goods were not diverted [2, 64].
- Whether SARS conducted a procedurally fair investigation before issuing its letter of intent and demand, having regard to the unsubstantiated charges levelled against the applicant and SARS's refusal to furnish the applicant with the basis for those charges [33, 34, 35].
- Whether the COVID-19 pandemic conditions were a relevant factor in assessing good cause and the reliability of the evidence, given SARS's own published notices acknowledging disruptions to customs operations [30, 31, 32].
- Whether there were genuine, bona fide disputes of fact on the papers sufficient to preclude final relief on motion, applying the Plascon-Evans rule [55, 56].