Smartphone SP (Pty) Ltd v Absa Bank Ltd and Another

• Jurisdiction: South Africa
• Citation: 2004 (3) SA 65 (W)

Smartphone SP (Pty) Ltd v Absa Bank Ltd and Another
2004 (3) SA 65 (W)

2004 (3) SA p65

Citation	2004 (3) SA 65 (W)
Case No	03/3331
Court	Witwatersrand Local Division
Judge	Ponnan J
Heard	November 7, 2003
Judgment	November 21, 2003
Counsel	P J van Blerk SC (with him D L Cook) for the applicant.; A Subel SC (with him M T Gleaser) for the first respondent.; C J van Coller (with him A T Ncongwane) for the second respondent.

Flynote : Sleutelwoorde B

Revenue — Value-added tax — Collection and recovery of — Value-Added Tax Act 89 of 1991, s 47 — Appointment of agent in terms of — Notice issued by second respondent served on first respondent, who paid second respondent from and debited applicant's account — Objection thereto by C applicant — Objects of Act considered — Section 47 not aid to determining liability, but simply providing mechanism for second respondent to obtain payment — Not up to first respondent to question or challenge notice and appointment as agent — No suggestion of mala fides on part of Commissioner — Applicant failed to review or set aside various administrative decisions taken by second respondent preceding s 47 notice — Other legal remedies open to D applicant — Urgent application dismissed.

Headnote : Kopnota

Without having given notice to the applicant that an amount was due, nor having issued an assessment against the applicant, the second respondent (SARS) had issued a notice in terms of s 47 of the Value-Added Tax Act 89 of 1991 and served it on the first E respondent. Based thereon, the first respondent had debited the applicant's bank account and paid SARS. The applicant brought an urgent application for a declaratory order requesting the reversal of the payment with interest, and declaring as unlawful the appointment by SARS in terms of s 47 of the first respondent as an agent of the applicant. The applicant contended that the first respondent should F have satisfied itself as to the validity of the s 47 notice before debiting its account.

Held, that s 47 permitted the Commissioner to appoint an agent to a taxpayer for purposes of paying tax. It was not an aid to determining liability, but merely provided SARS with a mechanism for obtaining payment. (At 69E.)

Held, further, that the first respondent was appointed as the applicant's agent and not of SARS. An agent once declared as G such by SARS was obliged to act on pain of penalties. It was inconceivable that the first respondent should have queried the underlying tax causa or the s 47 notice, which sought an immediate payment of funds on behalf of the applicant. The first respondent could not itself question the lawfulness of a directive by SARS to make payment to it in terms of s 47, nor could it dispute the validity of any claim by SARS against the applicant for payment of H tax, additional tax, penalties or interest. It was not open to the first respondent to challenge any of the underlying administrative acts culminating in its appointment as an agent of the applicant. (At 69G/H - 70B.)

Held, further, that a Court had narrow powers to review conduct which had as its foundation the subjective opinion of the administrative decision-maker. It had not been suggested by the I applicant that the Commissioner had acted mala fide or with ulterior motives or failed to apply his mind in respect of the appointment in terms of s 47. (At 70B - C.)

Held, further, that the applicant sought declaratory relief, absent a review and setting aside of various administrative decisions taken by SARS preceding the issue of the s 47 notice. The anomaly of the Court granting relief sought J

2004 (3) SA p66

by the applicant, while those decisions remain extant, was obvious. The manifest absurdity of the A Court granting final relief, in the absence of a proper inquiry as to whether the tax or other liability was payable, was patent. (At 73I.)

Held, further, that the applicant had launched the present urgent application without exercising its rights of objection and appeal or availing itself of its other legal remedies and without a proper determination of those issues. Application dismissed. (At 74B - C.) B

Cases Considered

Annotations

Reported cases

Contract Support Services (Pty) Ltd and Others v Commissioner, South African Revenue Services, and Others 1999 (3) SA 1133 (W): approved

Cools v The Master and Others 1998 (4) SA 212 (C): referred to C

Industrial Manpower Projects (Pty) Ltd v Receiver of Revenue, Vereeniging, and Others 2001 (2) SA 1026 (W): dictum at 1035D applied

Leech and Others v Farber NO and Others 2000 (2) SA 444 (W): referred to

Metcash Trading Ltd v Commissioner, South African Revenue Services, and Another 2001 (1) SA 1109 (CC): referred to

Mpande Foodliner CC v Commissioner for the South African Revenue Service and Others 2000 (4) SA 1048 (T): D criticised

National Educare Forum v Commissioner, South African Revenue Service 2002 (3) SA 111 (TkH): dictum at 139E - 140B applied

Radebe v Minister of Law and Order and Another 1987 (1) SA 586 (W): referred to

Singh v Commissioner, South African Revenue Service 2003 (4) SA 520 (SCA): distinguished E

South African Defence and Aid Fund and Another v Minister of Justice 1967 (1) SA 31 (C): dictum at 34in fin - 35D applied

Strauss and Others v The Master and Others NNO 2001 (1) SA 649 (T): referred to. F

Statutes Considered

Statutes

The Value-Added Tax Act 89 of 1991, s 47: see Juta's Statutes of South Africa 2002 vol 3 at 2-915.

Case Information

Urgent application for a declaratory order. The facts and issues appear from the reasons for judgment. G

P J van Blerk SC (with him D L Cook) for the applicant.

A Subel SC (with him M T Gleaser) for the first respondent.

C J van Coller (with him A T Ncongwane) for the second respondent.

Cur adv vult.

Postea (November 21). H

Judgment

Ponnan J:

[1] In an application which came before me by way of urgency, the following relief is sought: I

'1.

. .

2.

Declaring:

2.1

as unlawful the appointment of the first respondent as an agent of the applicant in terms of s 49 [that should have read 47] of Act 89 of 1991 by the second respondent; J

2004 (3) SA p67

Ponnan J

2.2

that the first respondent was not entitled to debit the applicant's account No 9070297632 (the applicant's account) with the A first respondent in the sum of R70 917 268,45;

2.3

that the applicant's account is forthwith to be credited by the first respondent in the amount of R70 917 268,45 together with interest at the rate of 15,5% per annum, alternatively the rate paid by the applicant on such account at all times material B hereto, from 23 October 2003 to date of the making of such credit.

3.

Ordering the first respondent to credit the applicant's account in the amount of R70 917 268,45 together with interest at 15,5% per annum, alternatively the rate paid by the applicant on such account at all times material hereto, from 23 October 2003 C to date of the making of such credit.

4.

Alternatively to prayers 2.2, 2.3 and 3 above, ordering the second respondent to pay to the applicant the amount of R70 917 268,45, together with interest at the rate of 15,5% per annum from 23 October 2003 to date of payment. D

5.

Ordering the second respondent to pay the costs of this application on an attorney and own client scale.

6.

Ordering the first respondent to pay the costs of this application jointly and severally with the second respondent, on an attorney and own client scale, only in the event of the first respondent opposing the application.' E

[2] On 23 October 2003, the first respondent (ABSA) debited the applicant's bank account with an amount of R70 917 268,45 which it then paid to the second respondent (SARS). The basis on which ABSA did so, was a notice dated 22 October 2003, issued by SARS under s 47 of the Value-Added Tax Act 89 F of 1991 (the Act). Those undisputed facts triggered the launch of the present application.

[3] Although the papers filed, totalling some 250 pages, were somewhat prolix, the applicant's case reduced itself to one narrow issue. The applicant's case was, at first blush, a relatively simple one, namely that SARS had not, prior to the issuing of the s 47 G notice, alleged as against the applicant that an amount was due, nor had it issued an assessment against the applicant in terms of s 31 of the Act. Accordingly, so the argument went, a necessary jurisdictional prerequisite to the appointing by SARS of ABSA as an agent, was absent. Hence, according to Mr Van Blerk, the appointment of ABSA H was unlawful and the consequent debiting of the applicant's account fell to be set aside.

[4] SARS is endowed under the Act with wide and extensive powers. Those powers have been held to be reasonably necessary for SARS to perform the important function of collecting tax. [1] It may be convenient at this stage to I consider briefly the scheme of the Act. In terms of s 7 of the Act a tax known as value-added tax is created. The obligation to pay

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