Predominantly in the context of high-risk products, such as tobacco, being exported or in transit through South Africa, the question frequently arises as to whether the goods were indeed exported. Over time, illicit trade is costing the fiscus billions of rand, and it is therefore understandable if the Commissioner for the South African Revenue Service (“the Commissioner” or “SARS”) examines or questions the actual export of such goods. However, SARS cannot disregard or reject compelling evidence of the export in order to claim duties, penalties, and forfeiture amounts.

The Gauteng Division of the Pretoria High Court recently cast the spotlight on this crucial aspect relating to exported goods. In the judgment of Poseidon Operations (Pty) Ltd v Commissioner for South African Revenue Service and Others (23278/2022) [2025] ZAGPPHC 539 (26 May 2025), the Court concluded that it was satisfied that the applicant had demonstrated that the goods were not diverted and were in fact duly exported. The judgment is indeed welcomed by exporters, and it is noteworthy to analyse the factual matrix which guided the Court’s conclusion.

Background:

Poseidon Operations (Pty) Ltd. (“the applicant”) is a licensed clearing agent that contracted with a Chinese-based company to assist with the clearance, warehousing, and subsequent export of goods entering South Africa. The events leading up to the dispute unfolded during May 2020, when the global COVID-19 pandemic was at its peak. The contractual obligations imposed upon the applicant warranted the nomination of other role-players such as clearing agents, licensed removers of goods, and warehouse licensees. Although these parties were cited as respondents in the proceedings, the first respondent, the Commissioner for the South African Revenue Service (“the Commissioner” or “SARS”), is the only party that opposed the application.

The facts surrounding the dispute are not unique to the logistics sector. Due to logistical challenges during the exportation of the goods, it became necessary to intersperse the loads between various trucks. Unfortunately, one of the trucks transporting the goods was detained by SARS, which alleged that various items that were reflected on the customs export documents were not loaded into the truck, and as such, SARS deemed the goods diverted. Notwithstanding this, the applicant submitted evidence to rebut SARS’s assertion that the goods were diverted.

Following the issuing of a letter of intent and the applicant’s response thereto, SARS issued a letter of demand claiming duties, a penalty and an amount in lieu of forfeiture. The letter of demand was primarily based on SARS’ allegation that the goods had been diverted and were thus dealt with contrary to the provisions of the Customs and Excise Act No. 91 of 1964 (“the Act”). The applicant, after unsuccessfully pursuing internal dispute resolution mechanisms, launched review proceedings to set aside the decisions embodied in SARS’ letter of demand.

Issues to be determined:

The Court scrutinised two important issues in the proceedings: Were the goods indeed diverted as alleged by SARS, and had the applicant demonstrated good cause to warrant the remission of the penalty and forfeiture amounts?

Diversion:

According to section 18A(9) of the Act:

“(a)     No person shall, without the permission of the Commissioner, divert any goods for export to a destination other than the destination declared on entry for export or deliver such goods or cause such goods to be delivered in the Republic or any other country in the common customs area.

(b)  Goods shall be deemed to have been so diverted where—

(i)  no permission to divert such goods has been granted by the Commissioner as contemplated in paragraph (a) and the person concerned fails to produce valid proof and other information and documents for inspection to an officer or to submit such proof, information and documents to the Commissioner as required in terms of subsection (2) (b) (ii) and (iii), respectively;…

(c)  Where any person fails to comply with or contravenes any provision of this subsection, the goods shall be liable to forfeiture in accordance with this Act.”

The applicant relied on various documents in support of its arguments that the goods were indeed exported to the destination specified on the SAD500, that is, the mine in Katanga, Democratic Republic of Congo (“DRC”), thus demonstrating compliance with section 18(13)(a)(i) of the Act. Included in such documents was a letter from the supplier, the invoice from China, a supporting affidavit deposed to by an employee of the consignee, confirming that all the goods forming the subject matter of the dispute had been duly received. The probative value of the evidence contained in the supporting affidavit was favourably considered by the Court. Such evidence included the deponent’s personal involvement in the offloading of the goods, confirmation of receipt of all the goods and thereafter authorising payment.

Additionally, the records relied upon by the applicant as proof of delivery were duly stamped by the DRC Authorities. The supplier’s invoice was corroborated by the consignee’s confirmation that the full order had been duly received.

The Court accepted the evidence presented by the applicant and concluded that the goods were indeed exported as had been declared to SARS. Notably when such evidence and details were presented to SARS as part of the applicant’s response to the letter of intent, which included a request for reasons, SARS maintained its stance that the goods were diverted and did not furnish the details requested by the applicant. Instead, SARS issued a letter of demand. It was emphasized by the Court that SARS’s “intractable position that the goods had been diverted” was akin to the failure to follow due process and tantamount to “a violation of the higher duty placed on the state to respect the law”. Considering all the prevailing circumstances, the goods had not been diverted.

Good cause:

Section 93(2) of the Act states: “The Commissioner may, on good cause shown, mitigate or remit any penalty incurred under this Act on such conditions as the Commissioner may determine.”

In addressing the element of good cause, the Court referred to the judgment of Madinda v Minister of Safety and Security, Republic of South Africa (153/07) [2008] ZASCA 34; [2008] 3 All SA 143 (SCA); 2008 (4) SA 312 (SCA) (28 March 2008), quoting the following excerpt:

“‘Good cause’ looks at all those factors which bear on the fairness of granting the relief as between the parties and as affecting the proper administration of justice. In any given factual complex, it may be that only some of many such possible factors become relevant…”

The Constitutional Court in Brummer v Gorfil Brothers Investments (Pty) Ltd and Others (CCT45/99) [2000] ZACC 3; 2000 (5) BCLR 465 ; 2000 (2) SA 837 (CC) (30 March 2000), adopted the stance that good cause requires the Court to consider relevant factors. In alignment with this concept, the Court duly considered the applicant’s compelling arguments and probative evidence presented and concluded that since the goods had been duly exported, the Commissioner was directed to remit the penalty and forfeiture amounts.

Conclusion:

Section 18A(9) of the Act refers to the submission of valid proof, information, and documents to the Commissioner as proof of export. The judgment is a significant precedent in establishing what forms of documents and information constitute proof of export. The Court accepted the supplier’s letter, the invoice from China, the supporting affidavit from the consignee, and the proof of delivery documents, which were stamped by the relevant DRC authorities, as proof of export and a basis for setting aside SARS’ letter of demand and findings that the goods were diverted.

In summary, the party that bears the onus of proving export of the goods must present evidence from the consignee and the revenue authorities in the export country confirming that the goods were duly received. The burden of proof is thus wide and does not hinge on a specific document only. Importantly, all the relevant circumstances of the matter must be considered, taking into account the inherent challenges occasionally faced by the industry.