2 June 2022 by and Tax & Exchange Control Alert

May SARS widen its scope to investigate and seize? Yes, it’s warranted!

In the case of Bechan and Another v SARS Customs Investigations Unit and Others (19626/2022) [2022] ZAGPPHC 259 (28 April 2022) the High Court was tasked with deciding whether the South African Revenue Service (SARS) acted unlawfully in searching motor vehicles parked outside of designated premises and whether the affected persons could demand the return of the seized items through the mandament van spolie.

On 28 March 2022, a warrant was issued in terms of sections 59 and 60 of the Tax Administration Act 28 of 2011 (TAA). The warrant authorised SARS to seize information and documentation at the premises of, and related to, a particular taxpayer (Taxpayer).

The day after obtaining the warrant, SARS arrived at the Taxpayer’s premises in order to execute it. The premises were located within an office park, which was shared with a number of other companies. Access to the office park was controlled, and SARS was delayed in entering the premises. During the time of this delay, SARS officials noticed various people carrying items from the office premises to motor vehicles parked in the general parking area. When the SARS officials eventually gained access to the premises they encountered several of the Taxpayer’s directors as well as the applicant in this case, Mr Bechan, who informed SARS that he was at the office park for business with a different company.

While executing the warrant, SARS investigated the vehicles parked in the general parking lot and noticed that several of these vehicles contained documents relating to the Taxpayer.

On SARS’ version, when Mr Bechan was asked to open his motor vehicle he informed them that he did not have the keys. Considering the resistance SARS faced to execute its warrant, both the South African Police Service (SAPS) and the Hawks were called in to assist. SARS then procured the services of a locksmith to open Mr Bechan’s vehicle and the other vehicles whose owners had refused to open them.

On Mr Bechan’s version, he denied ever refusing to open his vehicle and claimed that he had immediately handed both his cell phone and his vehicle’s keys to SARS. Despite the differing versions, once Mr Bechan’s vehicle was opened, SARS removed certain items and took them into custody, duly inventoried.

Mandament van spolie application

Mr Bechan then brought an application for a mandament van spolie order. This was an order to obtain the return of the items taken from his vehicle, which by the time the court heard the application, amounted to two laptops and two cell phones. SARS had returned all the other items beforehand.

The court relied on the principles stated in the Constitutional Court case of Anale Ngqukumba v The Minister of Safety and Security 2014 (5) SA 112 (CC) that the “essence of the mandament van spolie is the restoration before all else of unlawfully deprived possession of the possessor”. Essentially, it is premised on the philosophy that no one should resort to self-help to obtain or regain possession and aims to preserve public order by restraining people from taking the law into their own hands and encouraging them to rather follow due process.

Mr Bechan’s application was based on the contention that the items had been in his undisturbed possession and that SARS had unlawfully dispossessed him of them.

The court noted that on Mr Bechan’s version of events, he had handed his vehicle keys to SARS upon request and so had voluntarily relinquished possession of his vehicle – which means that the fundamental requirements for the mandament van spolie would not be met.

However, the court considered SARS’ version to be fundamentally more probable and that Mr Bechan did not relinquish possession of his vehicle, since SARS had involved both the SAPS and the Hawks and had experienced a delay of approximately 10 hours before the vehicle could be opened by a locksmith. This militated against Mr Bechan’s version. As such, the court was in no doubt that Mr Bechan was deprived of possession by SARS.

The court noted that the mandament van spolie can only succeed where the dispossession was unlawful and so the next question was whether the deprivation was lawful or not. SARS submitted that although neither Mr Bechan nor his vehicle was specifically identified in the warrant, section 62(1) of the TAA applied in these circumstances.

Searching premises not identified in a warrant

Section 62 of the TAA, titled “Search of premises not identified in warrant”, and section 62(1) in particular, essentially empowers a SARS official to enter and search premises not identified in a warrant, as if those premises had been identified in the warrant – subject to the qualifications in this section.

The court explained that with this section being applicable, SARS was entitled, in executing the warrant, to confirm whether Mr Bechan had in his possession or under his control any of the Taxpayer material specified in the warrant. Considering that SARS officials witnessed material being carried to motor vehicles, their decision to search Mr Bechan and his vehicle was not unreasonable.

In defending Mr Bechan’s election to pursue restoration of the items under the mandament van spolie, SARS argued that the appropriate procedure to obtain the return of his property was in terms of section 66 of the TAA.

Returning seized material

Section 66, titled “Application for return of seized relevant material or costs of damages”, essentially states that a person may request SARS to, among other things, return some or all of the seized material; if SARS refuses the request, the person may then apply to the High Court for the return of the seized material. The court may then, if good cause is shown, make the order it deems fit.

Mr Bechan’s counsel argued that the warrant had to be construed as narrowly as possible, including that since the TAA contained no definition of “person” (and should be read interchangeably with “taxpayer”), the proper interpretation of “premises” in section 62 ought to be read to mean the premises of the taxpayer in respect of whom the warrant had been issued. The contention being that since Mr Bechan parked in a general parking area – which was not on the premises of the Taxpayer – it was unlawful for SARS to open his vehicle and seize the items.

The court contemplated the following elements of the warrant: firstly, it provided for the seizure of material relevant to the Taxpayer at the specified premises; secondly, the warrant referred to the physical street address where the Taxpayer conducted business and where Mr Bechan found himself on the day in question; and finally, the description of the warrant of the address where it was to be executed together with the description of the material forming the subject of the warrant made it clear that SARS sought material relevant to the Taxpayer.

The court then held that:

  • The warrant in its terms provided for the search anywhere on the premises identified in the warrant, which included vehicles parked on the premises.
  • Interpreting the warrant as restrictively as argued by Mr Bechan’s counsel would undermine its efficacy – which is the very situation SARS encountered when its entry to the premises was delayed.
  • Even if it could be argued that the warrant was not sufficiently wide to include Mr Bechan’s vehicle, the provisions of section 62 entitled SARS to open the vehicle and take possession of the Taxpayer information in it.

Consequently, the court dismissed the application.

Observation

The importance of this case lies in suggesting that SARS is not strictly limited in its execution of a warrant. Rather, in certain circumstances, it appears that SARS is empowered to investigate other premises with the purpose of seeking any relevant material related to the taxpayer in question. Furthermore, while a taxpayer is entitled to request the return of seized material, the judgment seems to indicate that a taxpayer should do so in terms of section 66 of the TAA and not the mandament van spolie.

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