Island View Storage Limited v Commissioner for the South African Revenue Services

• Jurisdiction: South Africa
• Judge: Chili AJ
• Judgment Date: 08 April 2014
• Docket Number: 12262/2012
• Court: KwaZulu-Natal High Court, Durban
• Hearing Date: 14 November 2013
• Citation: 2014 JDR 0779 (KZD)

Chili, AJ

[1]

The applicant brought an application for an order in the following terms:

(1)

that the determination by the respondent that the stolen ethanol forming the subject matter of the present application does not qualify for a rebate in terms of rebate item 624.50 in schedule 6 to the Customs and Excise Act 91 of 1964 (herein after the 'Act') to be set aside on appeal and the said determination be replaced with the determination that the stolen ethanol does qualify for the said rebate.

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Chili AJ

(2)

in the alternative to prayer 1 above, that it be declared that the said ethanol qualifies for a rebate in terms of item 624.50 in schedule 6 of the said Act.

(3)

in the further alternative, that the decision of the respondent that the said ethanol does not qualify for a rebate in terms of the said rebate item, be reviewed and set aside.

(4)

in the further alternative that it be declared that the duties and levies which the applicant will have to pay in the event of an adverse decision by the honourable court in terms of prayers 1-3 above , will qualify for the refund in terms of section 76(2) (d) of the Act.

(5)

that the demand by the respondent made on 22 June 2012 in terms of which the applicant is held liable for payment of duties an interest in the amount of R4 090 892, 88 be set aside.

(6)

that the respondent plea ordered to pay the costs of this application.

(7)

further and / or alternative relief.

PARTIES

[2]

The applicant conducts business as a third party liquid bulk storage facility at 142 Wharfside Road, Durban, within the port of Durban. For this purpose the applicant's storage facilities are licensed by the respondent as customs and excise storage warehouses in accordance with the provisions of sections 19, and 21 of the Act.

[3]

The respondent (hereinafter referred to as "the Commissioner") who is in the employ of South African Revenue Services (herein after 'SARS') is charged with the administration of the Act including the interpretation of the schedule thereto. [1]

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Chili AJ

FACTUAL BACKGROUND

[4]

The applicant is in the business of storing ethanol which attracts excise duty the payment of which very briefly is deferred when stored by the applicant's warehouse in terms of the Act. The applicant alleges in its founding affidavit that on 21 June2009, it discovered a loss of 35 839 kg of ethanol in its warehouse. I deal in detail with circumstances surrounding the loss of ethanol later in my judgment. Following on the investigation conducted by or on behalf of the applicant, the applicant concluded that the ethanol was stolen by certain individuals in collaboration with one of its employees. A case of theft was reported to SAPS Maydon Wharf on 1 July 2009.

[5]

The police conducted their own investigation which led them to a storage house in Pinetown where ethanol weighing approximately 13 000 kg which had been stored in containers was recovered. On 15 July 2009 samples of the said ethanol were tested by INTERTEK Surveyors and it was established that the said samples "were 99.99% ethanol." On 20 July 2009 the said ethanol was removed from the Pinetown Warehouse to the applicant's premises where it was stored. Theft of ethanol was subsequently reported to SARS on 24 July 2009. Following on that report SARS addressed a letter of intent to raise a debt for the loss of the ethanol to the applicant on 1 March 2010. Pursuant to that letter, the applicant (through it attorneys) and SARS, exchanged numerous correspondence. Ultimately on 31 May 2010, SARS addressed a letter to the applicant demanding payment of R3 469 308.41 in respect of excise duties in terms of section 20 (5) of the Act.

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Chili AJ

[6]

The stance taken by SARS was that the ethanol in question did not qualify for a rebate of duty in terms of the applicable rebate item 624.50 in schedule 6 to the Act citing the following reasons:-

"(i)

the loss of alcohol was not sustained under circumstance due to viz major,

(ii)

the summary of the circumstances surrounding the loss of the ethanol has not been found to be exceptional ; and

(iii)

there is no assurance that the ethanol in question was not placed into home consumption."

[7]

Responding to a request for reasons by the applicant, SARS forwarded a letter to the applicant stating:

"This office maintains that whilst IVS [the applicant] has furnished a detailed chronological sequence of events leading up to the loss of the ethanol, IVS (the applicant) has failed to furnish the most crucial piece of information- the actual underlying cause of the loss incurred. Noting that the actual underlying causes of the loss suffered by IVS (the applicant) has not been established and furnished, this office considers the loss to be mysterious and unfortunate. The loss of ethanol suffered by IVS (the applicant), which cannot be accounted for is therefore not deemed to be exceptional.

Further the SARS maintains that while IVS (the applicant) has failed to furnish in detail underlying causes of the loss incurred; and that the ethanol thus lost remains unaccounted for, IVS (the

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Chili AJ

applicant) is not in a position to give SARS any assurance that the lost ethanol has not been...