Section 88(1)(a) of the Customs and Excise Act 91 of 1964 (the Act) provides that any officer may detain any goods at any place ‘for the purpose of establishing’ whether the goods are liable to forfeiture. The question, which remains unanswered to a certain extent is, how long is the South African Revenue Service (Sars) entitled to detain imported consignments to establish whether it falls to be seized or forfeited?
Section 93 of the Act allows for the release of the consignments detained in terms of s 88 on provisional payment equating to the face value of the goods plus any unpaid duty. Although the consignments are allowed to be released on provisional payments, this section does not constitute a right to the importer or owner of the detained goods and SARS may still subsequently refuse to accept provisional payments.
An unreasonable period of detention to make a determination can expose a taxpayer to arbitrary deprivation of its right to property in terms of s 25 of the Constitution, as well as devastating economic consequences – given for example that apparel might only be suitable for a certain season based on current fashion trends.
It should be kept in mind that where Sars detains consignments in order to establish any liability to forfeiture, Sars has an obligation to conduct an investigation to make a determination to either seize or release the consignment. Detention is held to be the preliminary step in the process to reach a determination in this regard.
A first attempt to clear the air on what a reasonable period would be to detain goods in terms of s 88 is found in the case of Trend Finance.
In the Trend Finance case a quo the applicants imported three consignments of shoes into South Africa (SA) for Pep Stores and Foschini, respectively. All three consignments were detained shortly after or on arrival in SA during 1999 for purposes of investigating potential underpayment of duty. The consignments were, thereafter, released on agreements of provisional payments with the Controller of Customs.
On 29 March 2001, two years after the detention of the first consignment, Sars issued its decision to render the consignment liable to forfeiture in respect of the first consignment to the applicants. No determination at that stage had been made in respect of the other two consignments.
The applicants brought an application in the High Court to set aside the determination made in respect of the first consignment, to review the administrative action and to refund the provisional payments in respect of the remaining containers given that a ‘reasonable period’ has elapsed since the payments were made in 1999. At the time of the lodging of the application, a hefty five years after the detentions were made, the Commissioner was yet to make a determination pertaining to the second and third consignments.
The court a quo ruled in favour of the applicants on this aspect, in that, the Commissioner cannot detain the provisional payments indefinitely and that a limitation had to be read into ss 88 and 93 of the Act in this regard.
A revolutionary decision for taxpayers occurred in the consequent ruling of the Supreme Court of Appeal (SCA) where the decision of the court a quo was confirmed.
The court confirmed that a limitation should be read into s 88(1)(a) in terms of which the goods were detained to the effect that the right to detain goods only endures for a period of time reasonable for the investigation, which the section contemplates to be made, but no longer.
The SCA went on to state that there is no sufficient reason for the continued deprivation of the property once the purpose of the deprivation (to investigate whether the property is liable to forfeiture under the Act) is no longer justified, and the continued deprivation would accordingly be arbitrary as meant by s 25 of the Constitution (para 29).
The provisional payments made in terms of s 93(1)(c) were held to be subject to the same limitation (para 29).
The court held that after a reasonable time has lapsed, any determination by the Commissioner would be incompetent given that the time within it could have reached a determination has expired (para 30). In view of this conclusion, the SCA confirmed the order of the court a quo in directing the Commissioner to refund the provisional payments in respect of the second and third consignments including interest thereon.
Although the Trend Finance case dealt with the unreasonable period of retention of the provisional payments, it is similarly applicable to detention in terms of s 88 of the Act.
While the decision of the SCA is lauded, it is unfortunate that no definite guideline has been provided as to what constitutes a ‘reasonable period’. It is, however, a good way to reassure taxpayers that the customs officials might now detain goods with more consideration than before, conduct their investigations more speedily and that their provisional payments will have to be refunded after a reasonable time.
In conclusion, the decision in Trend Finance reassured taxpayers that Sars does not have the power to indefinitely detain imported goods and that an unreasonable period of detention will render its decision an arbitrary deprivation of property in terms of s 25 of the Constitution. Regard must, however, be had to the merits and circumstances of each case to determine reasonableness.
Michelle van der Merwe LLB (UP) is a candidate legal practitioner at Richard Meaden and Associates in Johannesburg.
This article was first published in De Rebus in 2021 (Aug) DR 34.
