Section 76C of the Customs and Excise Act, No 91 of 1964 (Act) provides for set-off as follows:
“Set-off of refund against amounts owing - Where any refund of duty is in terms of this Act due to any person who has failed to pay any amount of tax, additional tax, duty, levy, charge, interest or penalty levied or imposed under any other law administered by the Commissioner within the period prescribed for payment of the amount, the Commissioner may set off against the amount which the person has failed to pay, any amount which has become refundable to the person in terms of this Act”.
The provision has the effect that Customs may set off any amount due by a person against any amount of duty refundable and due to such a person.
There are cases where Customs also sets off amounts in, for example, the following circumstances:
- An amount for a customs penalty or other provisional payment (Amount A) is paid by client A to a customs clearing agent. The clearing agent pays the amount to Customs on behalf of client A.
- Client B of the same clearing agent instructs the clearing agent to make clearance for imported cargo, but once cleared, client B is not in a position to make payment to the clearing agent for the import duties and/or VAT due (Amount B). Amount B is due and payable to Customs.
- In the interim, client A mitigates his penalty and/or the provisional payment for amount A becomes refundable to client A.
- The SARS system can automatically set-off the amount due to client A against the (due) debt of client B as Amount B is due by, and Amount A payable to, the same clearing agent on the system.
Section 99(2) of the Act provides that agents appointed by importers may be held liable for the payment for duty and charges of the importer, except if certain pre-requisites are present.
However, it may be argued in certain circumstances that Customs may not set-off amounts due by a certain importer against amounts refundable to another.
Another example is the following:
- A customs clearing agent has a deferment account (which is in general terms an account to pay duties and VAT on a monthly basis) with Customs. Duty and VAT for client A of the clearing agent is paid by way of the deferment for a period of two years for a specific product upon importation.
- Client A obtains a tariff determination for the product to the effect that it is free of duty. The duty paid for a period of two years retrospectively from the date of the determination now becomes refundable to client A.
- SARS now credits the deferment account of the clearing agent and refuses to repay the amount refundable direct to client A. The clearing agent now has a credit on his deferment, but cannot necessarily repay the amount to client A.
It may be argued in certain circumstances that Customs could potentially be forced by a court to repay the amount refundable to client A in cash, instead of crediting the clearing agent’s deferment account.
In closing, we remind readers of the following:
- SARS advised the following regarding the new customs legislation (The Customs Duty Act, No 30 of 2014 (assented to 9 July 2014) and the Customs Control Act, No 31 of 2014 (assented to on 21 July 2014), but not yet effective):
“Please take note that we intend to temporarily halt any further amendments to the Rules after the comments during this round of public participation have been considered. This decision has been taken to facilitate the process of systems development in preparation for the first phase of implementation, which is expected to start before the end of the 2016/17 financial year”.
- Sections 931 and 933 of the Control Act provide that existing registrations and licenses (under the Act, ie the current legislation) will lapse after 30 days from the effective date of the New Acts, except if such registrants and/or licensees re-apply for new registrations and/or licenses under the new Acts. It is notable that the registration or license need not be approved within the 30 day period – the application must merely be made within the period.