SARS plays a vital role in the collection of revenue, the life blood of the country and which finances the wheels of government.  Given its critical role, SARS is granted draconian powers. But with respect, SARS can be less than transparent and does not always fight fairly.

The recent landmark decision by the Supreme Court of Appeal in the case of CSARS vs Richard’s Bay Coal Terminal (Pty) Ltd[1], however, highlights that the decisions made by SARS in respect of tariff determinations (and value determinations) which allow for a wide right of appeal, are however also capable of review. 

SARS argued that because the Customs and Excise Act (“CEA”) allows for a wide appeal – effectively the High Court can decide the issue de nova on the same evidence or on new evidence – the taxpayer does not have the right of review, nor can the tax payer call for the documents constituting the record that gave rise to the impugned decision in terms of Uniform Rule 53 [alternatively discovery in terms of Uniform Rule 35 (11)].

The decision is ground-breaking.  We do not discuss the case, or factual matrix in detail. This article is aimed at highlighting several the important principles confirmed by the Court.

It was held that the audit of the taxpayer, the findings and the decision of the Excise Appeal Committee (“EAC”) were quintessentially administrative action as defined by the Promotion of Administrative Justice Act (“PAJA”).  After an analysis of several cases, it was held that the right to administrative action that is lawful, reasonable and procedurally fair as provided for in section 33 of the Constitution, 1996 - and as fleshed out by PAJA - are an integral part of our law, the rule of law and principle of legality.  The Court quoted the Constitutional Court with approval stating that PAJA is not ordinary legislation; it was enacted to give effect to the provisions of section 33 of the Constitution and the right to just administrative action.  Statues allowing for administrative action must therefore be read with PAJA.

The Court held further that the argument put forward by SARS that a wide appeal excludes a right of review flies in the face of the principles that underpin the exercise of all public power as set out in section 33 of the Constitution. 

Section 195 of the Constitution provides that:

“195.   Basic values and principles governing public administration.—(1)  Public administration must be governed by the democratic values and principles enshrined in the Constitution, including the following principles:

(a)  A high standard of professional ethics must be promoted and maintained.

(b)  Efficient, economic and effective use of resources must be promoted.

(c)  Public administration must be development-oriented.

(d)  Services must be provided impartially, fairly, equitably and without bias.

(e)  People’s needs must be responded to, and the public must be encouraged to participate in policy-making.

( f )  Public administration must be accountable.

(g)  Transparency must be fostered by providing the public with timely, accessible and accurate information.

The Court noted that although a decision may be (substantively) correct, it might be made unlawfully or unfairly, which may give rise to a right of review of the impugned decisions. 

While it is more complicated, simply put, an appeal focuses on the outcome i.e. the decision itself, whereas a review focuses on the process leading to that outcome i.e., the reasonableness and procedural fairness in arriving at the outcome, which is governed by section 33 of the Constitution and PAJA.

In rejecting the argument put forward by SARS that a wide appeal excludes the courts’ jurisdiction of review, it was found that such an interpretation was untenable and would in conflict with:

1. Section 33 of the Constitution and PAJA which seeks to protect the right to just administrative action;
2. The rule of law and section 169 of the Constitution which gives the High Court the power to decide any violation of the principle of legality; and
3. Section 172 of the Constitution that empowers the Court to make a declaratory order that the conduct complained of is inconsistent with the Constitution and invalid to the extent of such inconsistency and in the circumstances to make an order that is just and equitable.

In looking at the specific wording of the relevant sections of the CEA, it was held that they do not exclude the right of review.[2]  The Court then made several strong comments towards the end of the judgment to the effect that:

1. The duty to discover documents is a tool for discovery of the truth.
2. There is a heightened need for a record where SARS has not provided reasons.  SARS cannot shield its own conduct from scrutiny by refusing to make disclosure of details relevant to its conduct.  It is moreover a duty on public officials to take the Court into their confidence and to disclose all relevant information to enable courts to make an informed decision in the public interest and to ensure good governance.
3. Quoting the Helen Suzman Foundation vs Judicial Service Commission [3] case, the Court quoted, with approval, the decision of the majority of the Constitutional Court in exercising the importance of openness and accountability as well as the danger of legalities being concealed from scrutiny, and the impact of non-disclosure on the fairness of the trial.

This decision will be far reaching and is a welcome confirmation that the basic values and principles governing public administration provided for in section 195 of the Constitution must be upheld and that a taxpayer’s rights in terms of section 33 of the Constitution read with the provisions of PAJA is not to be ousted.

As was stated by the Constitutional Court in Janse van Rensburg N.O. vs Minister of Trade and Industry N.O.,[4] in a modern state where administrative functionaries are granted more and more power, the safeguards imposed by the observance of procedural fairness ensures that the functionary has an open mind and a complete picture of the facts leading to a measured decision that are both fair and regular.

It is hoped that the fact that SARS must act transparently and can be compelled to disclose a record giving rise to impugned decisions, will lead to reasoned and better decision making.