SARS reeling under court judgement

2012-05-29 14:38

The South African Revenue Services (SARS) was today dealt a severe blow in what could be a precedent-setting judgment by the North Gauteng High Court.

The court ruled that it is unlawful for the taxman to invalidate tax clearance certificates without giving taxpayers an opportunity to defend themselves.

Durban businesswoman and multimillionaire Shauwn Mpisane – who is under investigation for alleged tax fraud – was granted an urgent interdict this afternoon preventing SARS from withdrawing a tax clearance certificate for one of her companies, Zikhulise Cleaning, Maintenance and Transport CC.

Mpisane, a close friend of suspended police commissioner Bheki Cele, argued that she was not given an opportunity to defend her company before SARS informed her that her clearance certificate had been withdrawn because of alleged non-compliance.

Judge Gregory Wright ruled that SARS acted “unlawfully” when it invalidated Mpisane’s tax clearance certificate for the period January 17 2012 to January 16 2013.

Mpisane’s lawyer, Rafik Bhana SC, said the interim judgment could have wide-ranging ramifications for the taxman – it could mean that all non-compliant taxpayers should be given an opportunity to defend themselves.

“This will mean that SARS may not just withdraw a tax clearance certificate and then inform the taxpayer later. This is a precedent-setting judgment because SARS can’t just arbitrarily take away the certificate,” said Bhana.

“SARS acted unlawfully in invalidating the certificate as it should have given Mpisane the right to be heard before taking a decision to withdraw the certificate.”

According to court papers, SARS withdrew the certificate on March 16 this year.

The certificate was issued on January 17 2012 to last a year and this would allow Mpisane’s company to bid for government tenders, conduct business and retain its compulsory registration with the Construction Industry Development Board and the National Homebuilders Registration Council.

Mpisane had argued that without the certificate her company would not be able to do any business, let alone be paid for work already done by her company.

“There is no explicit statutory provision or rule of any sort which grants SARS the power to issue so-called tax clearance certificates which SARS must take into account before issuing such certificates,” said Mpisane in court papers.

She argued that SARS had sought to regulate the issuing of such certificates using an unlawful policy.

The court agreed with Mpisane that SARS failed to act in a procedurally fair manner by giving Mpisane’s company adequate notice of the withdrawal.

“In fact SARS only advised Zikhulise of the decision which had taken approximately one month after it had taken the decision,” argued Mpisane in court papers.

Mpisane’s victory comes just days before she heads back to the Durban regional court where she is facing charges of tax fraud involving R2.4 million for allegedly submitting false invoices to reclaim Value Added Tax.

A spokesperson for SARS said the organisation would respond to the outcome of today’s case at a later stage.

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