The Commission for the South African Revenue Service v ABC Holdings Ltd
| Jurisdiction | South Africa |
| Judge | PA Meyer J |
| Judgment Date | 11 July 2018 |
| Citation | 2019 JDR 0146 (Tax) |
| Docket Number | IT14294 |
| Court | Tax Court |
Meyer J:
The excipient, the Commissioner for the South African Revenue Service (SARS), excepts to the Rule 32 statement of grounds of appeal of the appellant (the present respondent), ABC Holdings Limited, on the grounds that it lacks averments sufficient to sustain the appeal.
The first question to be determined is whether the procedure of excepting to a pleading finds application in an appeal to the tax court. SARS' exception is brought in terms of Rule 23(1) of the Uniform Rules of Court, read with Rule 42(1) of the Tax Court Rules. Rule 23(1) of the Uniform Rules of Court affords a party the procedural right to deliver an exception where –
'any pleading is vague and embarrassing or lacks averments which are necessary to sustain an action or defence'.
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Meyer J
Rule 42(1) of the Tax Court Rules provides that if –
'these rules do not provide for a procedure in the tax court, then the most appropriate rule under the Rules for the High Court made in accordance with the Rules Board for Courts of Law Act and to the extent consistent with the Act and these rules, may be utilised by a party or the tax court'.
Rule 18(4) of the Uniform Rules of Court provides that –
'[e]very pleading shall contain a clear and concise statement of the material facts upon which the pleader relies for his claim, defence or answer to any pleading, as the case may be, with sufficient particularity to enable the opposite party to reply thereto'.
Rule 22(2) provides that a –
'defendant shall in his plea either admit or deny or confess and avoid all the material facts alleged in the combined summons or declaration or state which of the said facts are not admitted and to what extent, and shall clearly and concisely state all material facts upon which he relies'.
A taxpayer, in terms of section 107 of the Tax Administration Act, 28 of 2011 (the TAA), has the right to 'appeal against the assessment . . . to the tax board or tax court in the manner, under the terms and within the period prescribed in [the TAA] and the [Tax Court Rules]'. An appeal to the tax court – called an appeal because the taxpayer appeals against SARS' assessment or decision – is in fact a trial. Evidence may be lead, and the taxpayer bears the burden of proof. SARS and the appellant in the tax court must also exchange 'pleadings'. SARS, in terms of Rule 31(1) of the Tax Court Rules, 'must deliver to the appellant a statement of the grounds of assessment and opposing the appeal'. An appellant, in terms of Rule 32(1), 'must deliver to SARS a statement of grounds of appeal'. SARS' statement of the grounds of assessment and opposing the appeal must, inter alia, set out a clear and concise statement of 'the material facts and legal grounds upon which SARS relies in opposing the appeal' (Rule 31(2)(c)) and an appellant's statement of grounds of appeal must similarly set out 'the material facts and the legal grounds upon which the appellant relies for the appeal and opposing the facts or legal grounds in the statement under Rule 31' (Rule 32(2)(c)).
The statement of grounds of assessment and opposing the appeal and the statement of grounds of appeal provided for in Rules 31 and 32 of the Tax Court Rules have the same object as pleadings in the Superior Court Practice; to define the issues so as to enable the other party to know which case it has to meet. (See Robinson v Randfontein Estates GM Co Ltd 1925 AD 173 at 198; Presidency Investments (Pty) Ltd v Patel 2011 (5) SA 432 (SCA) at 440 A-B.) The parties may, in terms of Rule 35 of the Tax Court Rules, agree that a statement of grounds of assessment and opposing an appeal or a statement of grounds of appeal or a reply to a
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Meyer J
statement of grounds of appeal, be amended, and, if the other party does not agree to the amendment, the party who requires the amendment may apply to the tax court for such relief. It is trite that 'the modern tendency of the Courts lies in favour of an amendment whenever such an amendment facilitates the proper ventilation of the disputes between the parties'. (See Rosenberg v Bitcom 1935 WLD 115 at 117; Magnum Simplex v The MEC Provincial Treasury (556/17) [2018] ZASCA 78 (31 May 2018), para 9.)
The exception procedure is a useful procedure 'to weed out cases without legal merit'. (See Telematrix (Pty) Ltd v Advertising Standards Authority SA 2006 (1) SA 461 (SCA), para 3.) It follows, therefore, as a matter of logic, that if either the Rule 31 statement or the Rule 32 statement does not contain averments which sustain the relevant party's case or is without legal merit, then the exception procedure provided for in the Uniform Rules of Court is equally an appropriate mechanism to deal with the question in the tax court. The exception procedure is consistent with the TAA and the Tax Court Rules. That the application of the exception procedure to 'pleadings' in the tax court is not contentious, is clear from ITC 1899 79 SATC 315. There, SARS filed a notice of exception to the appellant's amendment of its grounds of objection. Eksteen J upheld the exception on the basis that the proposed amendment was not legally sustainable.
The high-water mark of ABC's objection to the application of the exception procedure to the tax court practice appears to be that there may be circumstances that would render it undesirable to allow an exception before the tax court has heard all the evidence. The argument places the cart before the horse. The test on exception is whether, on all possible readings of the facts, no cause of action or defence is made out. It is for the excipient to satisfy the court that the conclusion of law for which the other party contends cannot be supported on any interpretation that can be put forward by the facts. (See Children's Resources Center Trust v Pioneer Food (Pty) Ltd and Others 2013 (2) 213 (SCA), para 36.) In other words, as was held in Eastern Produce Cape (Pty)...
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