Commissioner for the South African Revenue Service v Free State Development Corporation

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Dambuza AP, Zondi JA, Weiner JA, Mali AJA and Unterhalter AJA
• Judgment Date: 31 May 2023
• Citation: 2023 JDR 1843 (SCA)
• Hearing Date: 22 February 2023
• Docket Number: 1222/21
• Court: Supreme Court of Appeal

Weiner JA (Dambuza ADP, Zondi JA and Mali and Unterhalter AJJA concurring):

Introduction:

[1]

This appeal turns on whether the Free State Tax Court, Bloemfontein was correct in granting an order, permitting the respondent, the Free State Development Corporation (the taxpayer), to withdraw its statement of grounds of appeal (the original statement), filed in terms of Tax Court Rule (TCR) 31 (2), and to file an amended statement of grounds of appeal (the amended statement) against additional assessments levied by the appellant, the Commissioner for the South African Revenue Service (SARS).

2023 JDR 1843 p3

Weiner JA (Dambuza ADP, Zondi JA and Mali and Unterhalter AJJA concurring)

[2]

The Tax Court granted the relief sought by the taxpayer and granted it leave to file the amended statement within 20 days. It also granted leave to SARS to file a reply within 20 days of receipt of the taxpayer's amended statement. Leave to appeal to this Court was granted by the Tax Court.

[3]

SARS sought to overturn the Tax Court's decision on the basis that the amended statement was premised on a new ground of objection not originally raised. Thus, it had breached TCR 10(3) which provides that a taxpayer may not appeal:

'On a ground that constitutes an amended objection against a part or amount of the disputed assessment not objected to under rule 7.' [1]

[4]

The Tax Court has jurisdiction over tax appeals lodged under s 107 of the Tax Administration Act (TAA) [2] . In terms of s 117(3), it may hear interlocutory applications, or any application in a procedural matter relating to a dispute under Chapter 9 of the TAA (the chapter dealing with disputes and appeals). Its powers in relation to an assessment or a 'decision' under appeal, or in relation to an application in a procedural matter referred to in s 117(3), are set out in s 129(2) of the TAA. It reads as follows:

'In the case of an assessment or 'decision' under appeal or an application in a procedural matter referred to in section 117 (3), the tax court may –

a.

confirm the assessment or 'decision';

b.

order the assessment or 'decision' to be altered;

c.

refer the assessment back to SARS for further examination and assessment; or

2023 JDR 1843 p4

Weiner JA (Dambuza ADP, Zondi JA and Mali and Unterhalter AJJA concurring)

d.

make an appropriate order in a procedural matter.' [3]

Appealability:

[5]

The parties were requested to deliver supplementary submissions on whether the Tax Court's order was appealable. The order deals with the granting of an amendment. Ordinarily, this would be a purely interlocutory order, which does not dispose of any issue in the main appeal. In Macsteel Tube and Pipe, a division of Macsteel Service Centres SA (Pty) Ltd v Vowles [4] this Court held that:

'It is true that the refusal of an amendment may have a final and definitive effect because a party may be precluded from leading evidence at the trial in respect of the aspects which were to be introduced by the amendment of the pleadings. However, the granting of an amendment does not, without more, have that effect. Ordinarily, an order granting leave to amend is an interlocutory order which is not final and definitive of the rights of the parties.' [5]

[6]

The right to appeal a decision of the Tax Court falls under s 133(1) of the TAA, which provides that '[t]he taxpayer or SARS may in the manner provided for in this Act appeal against a decision of the tax court under sections 129 and 130'. It is trite that, in the ordinary course, to be considered appealable, the order or decision must be 'final in effect; not susceptible of alteration by the court of first instance; definitive of the rights of the parties, and, the order must have the

2023 JDR 1843 p5

Weiner JA (Dambuza ADP, Zondi JA and Mali and Unterhalter AJJA concurring)

effect of disposing of at least a substantial portion of the relief claimed in the main proceedings'. [6]

[7]

SARS contended that the decision was appealable because it was wrong. It relied for this submission on the dictum in The Commissioner for the South African Revenue Services v Airports Company for South Africa (ACSA) [7] where this Court per Windell AJA, held that:

'As I have shown the tax court wholly misconceived the matter. As a result, the order issued is plainly wrong and it can hardly be in the interests of justice to permit it to stand.'

[8]

Acsa dealt with an amendment to an objection, which was granted by the Tax Court, despite there being no provision for such an amendment in the TAA. An objection is part of the pre-litigation administrative process and is not a pleading. Thus it cannot be amended. TCR 31, 32 and 33 statements constitute the pleadings which may be amended in terms of TCR35. [8] Thus, this Court in Acsa arrived at the decision that the order of the Tax Court was wrong as the Tax Court had no power to grant the order which it did. In the present case, the TAA provides for the amendment of the statement of grounds of appeal, in terms of TCR 35.

[9]

The taxpayer argued that because the order is not definitive of the rights of the parties, and does not dispose of any of the relief claimed in the main proceedings, it did not conform to the principles set out in Zweni and thus was not appealable. The important distinction in the present matter is that the appeal of the Tax Court's order concerns the power of that court to grant an amendment

2023 JDR 1843 p6

Weiner JA (Dambuza ADP, Zondi JA and Mali and Unterhalter AJJA concurring)

in circumstances where, in the SARS' view, it had no such power. SARS submitted that:

'The Tax Court has permitted the operation of what may be termed a two-tiered tax system whereby a party sufficiently resourced to access the Tax Court can lay out a case in the midst of proceedings that contradicts its returns, its objections and its appeals, thus rendering that party untethered to the consequences of its own actions. This procedure is not available to any taxpayer who is bound by its declarations. The appellant's case is that the taxpayer was granted relief by the Tax Court that is not competent in statute and Rules and prejudices SARS in the process. . . .'.

[10]

In TWK Agriculture Holdings (Pty) Ltd v Hoogveld Boerderybeleggings (Pty) Ltd, [9] this Court held that:

'Where the challenge concerns the jurisdiction of a court, and hence the competence of a judge to hear the matter, the decision of the court is considered definitive, and appealable. This is consistent with the principles enunciated in Zweni because the decision as to jurisdiction is considered final. This position is entirely justified because an error as to jurisdiction, if not subject to appellate correction, would permit the court below to proceed with a matter when it had no competence to do so, rendering what it did a nullity. That is plainly an undesirable outcome.'

[11]

Thus, the Tax Court's order is appealable because it concerns the Tax Court's powers to grant the order which it did. SARS contends that such powers were lacking in terms of the Legislation and the Rules of the Tax Court. Questions of competence are always treated as having a final effect as a lack of competence would vitiate the decision. [10]

2023 JDR 1843 p7

Weiner JA (Dambuza ADP, Zondi JA and Mali and Unterhalter AJJA concurring)

The Basis of the appeal:

[12]

The issue at stake is whether the ground of appeal in the amended statement constitutes a new ground of objection not previously raised, as provided for in TCR 10(3). If it does, then the Tax Court had no jurisdiction to grant the order which it did. In other words, was the ground in the amended statement foreshadowed in the original objection filed in terms of TCR 7, as found by the Tax Court? For this purpose, it is necessary to consider the nature of the transactions that were concluded between the taxpayer and the Department of Trade and Industry (DTI), as this will assist in determining whether the amendment was foreshadowed in the objection.

Transactions:

[13]

It is common cause that the taxpayer is a registered VAT vendor, in terms of the VAT Act. It is the official economic development agency for the Free State province. In 2014, the Special Economic Zones Act (SEZ Act) [11] came into force. The objects of this Act are to provide for the designation, promotion, development, operation and management of Special Economic Zones (SEZs) and the establishment of a single point of contact to deliver the required government services to businesses operating in SEZs.

[14]

The SEZ Act provides that the licensee must establish an entity to manage the SEZ, and to provide the resources and the necessary means to manage and operate the SEZ. On this basis, the DTI identified the taxpayer as a public entity which would further its mandate of developing the SEZ.

2023 JDR 1843 p8

Weiner JA (Dambuza ADP, Zondi JA and Mali and Unterhalter AJJA concurring)

[15]

The Department of Economic, Small Business Development and Tourism and Environmental Affairs (DESTEA) wished to establish a SEZ within the Harrismith area of the Free State. It identified land registered in the name of the taxpayer. DESTEA requested the taxpayer to apply for a SEZ licence from the DTI on its behalf, on the understanding that the SEZ, when established, would be transferred into...